Big Bloom Ltd is a well-established public limited company growing flowers for the home market.

Mark scheme

Marking points from the official mark scheme (May/June 2011). The mark or mark type is shown in brackets.

1. [2] (a) (i) Any one benefit explained × 2 marks: can raise large amounts of capital using the stock exchange; has continuity of existence although the ownership of the shares may change; as there is no upper limit to the number of shareholders, it is easy to raise capital; as large companies, they are considered safer and so are able to borrow more easily; they are legal entities so they are separate from their shareholders and directors; with large amounts of capital available so can take advantage of economies of scale. NB raising money from shareholders = 0 marks as could apply to private limited company. Any other relevant benefit explained.
2. [2] (a) (ii) Any one benefit to shareholders explained × 2 marks: likely to be successful so likely to receive dividends from profits; have protection of limited liability so personal assets are not at risk; can attend the AGM and elect the directors; greater security of investment as a large company. Any other relevant benefit explained.
3. [6] (b) Level 2 (4-6 marks) Candidate has considered the effects of both free trade and protectionism in terms of Big Bloom's business. (If a candidate has considered either free trade or protectionism in relation to Big Bloom's business, award 4 marks max.) If the country in which Big Bloom is based operates free trade, Big Bloom may encounter competition in the home market. If some of the countries in which Big Bloom plans to sell operate free trade this means that Big Bloom will find it easier to export to these countries because there will be no trade barriers such as import duties or quotas. The countries operating protectionist policies may be trying to protect their home trade. They may be imposing high import duties, quotas on certain products and even embargoes. How much of an effect this will have on Big Bloom will depend on whether or not these protectionist measures relate to the import of flowers or whether they are imposed on other goods. Perhaps Big Bloom should only sell to those countries operating free trade. Level 1 (1-3 marks) Candidate has made some comments on free trade and/or protectionism and has/has not given an opinion. Free trade means operating without trade barriers. No import duties will be charged. Protectionist policies include quotas and currency control. Big Bloom may be affected.
4. [4] (c) Any four points × 1 mark or two explained points × 2 marks each: to find out how much is exported and how much is imported; and from where these are exported or imported; to identify trends in international trade as regards quantities, kind of goods and value; to calculate the Balance of Trade and the Balance of Payments; because the government requires customs to do this so that it can take any action required. Any other relevant point. NB comment on stopping smuggling, importing harmful products = 0 marks.
5. [6] (d) Any three factors explained × 2 marks each or two factors × 3 marks each: cost of transport – the most economic method of transport is likely to be chosen as this cost will add to the price of the flowers; quantity of flowers to be carried – bulk goods may be carried by ship, flowers may be in batches so air transport may be used; nature of the goods to be carried – flowers need refrigeration and need careful handling to avoid damage; distance – flowers are to be sent to neighbouring countries so several methods of transport may be suitable; value of the goods to be transported – flowers may be valuable in quantity so may need some security; availability of particular methods of transport – sea may be unsuitable as there may be no coastline; need for a regular service – Big Bloom hopes to sell to neighbouring countries – this implies using a method of transport that is reliable and available; environmental factors – choosing transport that uses less fuel, does not pollute the atmosphere, avoids excess packaging. Any other relevant factor explained. NB consideration of three methods of transport = 2 marks max.