BB Ltd is a toy manufacturer in Asia that is going to export for the first time to the European Union (EU) trading bloc.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [2] 1 mark for each feature
2. [2] A group of countries/member countries (1) sign an agreement (1)
3. [2] agree to free trade (1) no duty/tariffs/quotas/embargoes/barriers exist between these countries (1)
4. [2] have common tariff (1)
5. [2] free movement of labour/capital (1)
6. [2] agree to promote/increase trade with each other (1)
7. [2] external tariff charged on goods from non-member countries (1)
8. [2] 1 mark for advantage plus 1 mark for relevant explanation
9. [2] Increased sales/profits (1) selling goods to a new market/another country expands the size of its market / global market (1) more customers (1)
10. [2] Lower costs (1) expand production to meet higher demand leading to lower average costs / greater economies of scale (1)
11. [2] Reduced vulnerability / greater diversification (1) the company is able to spread its risk / not dependent on home country for sales (1)
12. [2] Able to sell excess production of toys (1) not selling well in the home market / avoiding giving discounts (1)
13. [2] 1 mark for reason plus 1 mark for relevant explanation
14. [2] Receive customer payment quickly/fast/first (1) via electronic devices / the internet (1) has proof of payment (1)
15. [2] Reduces risk of non-payment/fraud/scammed (1) after customers already have the toys/so that they are not given free toys (1)
16. [2] Other methods not convenient/acceptable (1) e/g. cash/cheques
17. [2] As a new seller (1) there may be a lack of trust / in other payment methods (1)
18. [2] 1 mark for reason plus 1 mark for relevant explanation
19. [2] Creates cash flow problems/need to pay other bills (1) if buyer does not have money available immediately (1)
20. [2] Buyer may be concerned that goods will not be sent (1) may be a scam/fraud (1) after paying for them in advance (1)
21. [2] May want to see/possess goods in person first (1) as never bought from BB before (1) so as to check quality (1) goods may arrived damaged/in poor condition (1)
22. [6] Up to 2 marks for describing air/sea transport
23. [6] Up to a further 2 marks for analysing which method of transport BB Ltd should use
24. [6] Up to a final 2 marks for evaluating BB Ltd's choice of transport
25. [6] Reasons to use air transport compared to sea transport: The need for speed / long distances (L1) up to 33 days quicker (L2) BB may want to get goods to market quickly (L2)
26. [6] More cargo planes available with greater capacity (L1) reducing costs of air freight (L2)
27. [6] Increased number of airports in Asia and the EU (L1) making more air routes available with better facilities at airports for handling cargo / greater storage facilities (L2)
28. [6] Greater security (I1) less theft/damage (L2)
29. [6] As BB are exporting for the first time (L1) they will want to meet deadlines (L1) increase reputation (L2)
30. [6] Reasons to use sea transport compared to air transport: It is cheap / particularly over long distances (L1) In Fig. 3.1, there is a saving of $3000 (L2) compared to using air transport which is expensive (L1)
31. [6] It can move large volumes of cargo (L1) so could export more toys (L2)
32. [6] Environmentally friendly (L1) with less pollution than air transport (L2) so may give BB a better image (L2)
33. [6] As goods are going by containers (L1) there is less theft/damage (L2)
34. [6] Goods can be subject to weather problems at sea (1) leading to delays (L2)
35. [6] Evaluation: Toys are usually quite cheap items so the cost of air transport would be a significant factor in deciding the export price of the toys and would affect the success of BB's new venture into exporting to the EU. Most businesses want to get goods to customers in the most cost-effective way possible so, as toys which are non-perishable/not valuable or luxury goods, sea transport is recommended because it will keep costs down. Later, if BB prove successful in exporting and there is high and fast demand, they could switch to air transport when they know the market better.