Nissa makes cheese which she sells to wholesalers. She has received a request to export some cheese to a buyer in Africa. She has read that there are many difficulties when exporting goods. Nissa is considering using an intermediary to help her to export her cheese.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2019). The mark or mark type is shown in brackets.

1. [1] Clears production lines
2. [1] saving Nissa the cost of storage/so less capital tied up in stock
3. [1] Purchases in bulk
4. [1] saving Nissa from splitting cheese into small quantities / having to deal with many small retailers
5. [1] Enables Nissa to produce ahead of demand
6. [1] so that Nissa can continue with production / not worry about storage
7. [1] Knowledge of market / customer tastes
8. [1] keeps Nissa informed about changes in demand
9. [1] Payment
10. [1] may pay promptly
11. [1] Storage
12. [1] put cheese in warehouse / use of cold storage / saves Nissa needing a warehouse
13. [1] Prepares cheese for sale
14. [1] e.g. packaging/branding
15. [1] Keeps stocks of cheese
16. [1] helping to balance out seasonal fluctuations
17. [1] Risk bearing
18. [1] the wholesaler is carrying the risk of Nissa's cheese not selling / demand changing
19. [1] Delivery/distribution
20. [1] collecting cheese from Nissa / transporting cheese to their warehouse
21. [1] Advertising
22. [1] making the cheese known / attracting customers
23. [1] Enquiry/letter of enquiry
24. [1] Quotation
25. [1] Price list/catalogue
26. [1] Order
27. [1] Invoice
28. [1] Advice note
29. [1] Delivery note
30. [1] Consignment note
31. [1] Credit note
32. [1] Debit note
33. [1] Statement of account
34. [1] Receipt
35. [6] Up to 2 marks for describing exporting and intermediaries
36. [6] Up to a further 2 marks for analysing reasons for and/or against using an intermediary in exporting cheese
37. [6] Up to a final 2 marks for evaluating how Nissa should export her cheese
38. [6] Reasons for using intermediaries: The business is able to concentrate on other aspects of the business – that may otherwise be neglected. Intermediaries should be experts at this work and will introduce the business to potential buyers – leading to increased sales. Intermediaries will have the necessary expertise in what they are selling and what the local consumers are likely to demand as they will have a network of contacts – reducing risk of failure. Intermediaries assume responsibility for transporting / customs clearance – which saves the business time gaining that knowledge and expertise. It cuts down the need to travel to overseas markets – and the time saved can be used for other purposes. Solves the problem of not being sure whether they will receive payment for goods / some intermediaries guarantee payment – so avoid bad debts.
39. [6] Reasons against using intermediaries: Intermediaries are not as interested in the success of business as the owners are. Intermediaries will charge commission or pay less for the products – than if the business was selling directly to consumers. They may not be exclusive – they may have other more favoured clients that they are also an intermediary for and may promote them more. Intermediaries will need to be supervised – as they may carry out unethical practices.
40. [6] Evaluation example: Nissa should think about exporting the cheese herself as she is only dealing with one buyer and that will save her money and time in finding a suitable agent. However, as it her first time exporting, with all the challenges that exporting brings, it might be better to use an agent so that she can concentrate on the production and quality of her cheese which will keep her customers satisfied. Also if she uses an agent there will be no need to recruit and train a new employee to do the exporting for her but it will take time and money.