Mrs Ney owns a mobile shop selling bread and cakes in her neighbourhood. She is experiencing competition from other retailers.

Mark scheme

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

1. [1] (a) One mark for a shop in a van/serve local area/serve rural areas/serve housing suburbs of towns/bring products to the consumer/moves from place to place.
2. [2] (b) (i) Any two points × 1 mark each: • competition from supermarkets • competition from online retailers • competition from hypermarkets • competition from shops where self service is offered • competition from department stores • competition from multiple retailers • competition from large-scale retailers • competition from small bakery shops • competition from other mobile shops. Any other relevant point.
3. [3] (ii) Any three points × 1 mark each and up to 3 marks for a well-developed point: • she offers a limited range of products • the customer does not know when she is coming • her prices may be high to cover the cost of the vehicle and low sales • other shops offer better facilities and better/fresher products • other shops offer one-stop shopping for food • other shops offer lower prices • other shops offer self-service so that consumers can inspect the goods before purchase • other shops may offer more or better promotions • other shops may be better known/more advertising. Any other relevant point.
4. [4] (c) Any two services described in context × 2 marks each: • breaking bulk – selling to her in small quantities • offering cash and carry services so that Mrs Ney can buy competitively • providing a variety of products so that she does not have to deal with many suppliers • giving advice to Mrs Ney about new products • providing goods when she requires them and storing them until required • delivery of bread and cakes regularly to Mrs Ney's premises • offering trade discount so that Mrs Ney can make a profit. Any other relevant service described.
5. [4] (d) Any two reasons explained × 2 marks each: • she may not have the finance to expand into online selling with the additional costs of setting up a website and processing orders • she wishes to concentrate on what she is doing and try to counteract the competition • bread and cakes have a short shelf life so will not transport easily/there will be wastage • she may think there is too much competition online and that it will not be successful. Any other relevant point
6. [6] (e) Level 2 (4-6 marks) Has discussed whether or not Mrs Ney would benefit from buying a franchise and has given a reasoned opinion. (If a one-sided discussion is presented, award 4 marks max). A franchise occurs when a well-known business allows individuals to sell a product in a specified area on payment of royalties. Mrs Ney is, presumably, a sole trader and therefore her own boss. A franchise would give Mrs Ney certain advantages. She would have access to a ready-made market. She would have expert assistance from the parent company in many aspects of her business. The risk of failure, which is she facing because of the competition, would be reduced. Her supplies might be cheaper so that she has more chance of making profits. Advertising costs may be saved. Although her area of operation would be restricted, she would have a monopoly in a local area so that competition from other franchisees of the same business is prevented. If she remained as a sole trader, she would continue to run her mobile shop. She would be able to make her own decisions without rules laid down by the franchise company. All her profits would be her own without the payment of royalties which could be high. She would still be in control of her business. Mrs Ney probably needs to consider a franchise very seriously. She may need to change the nature of her business anyway because of the difficulties she is meeting. It may be a choice between opening small shop as a sole trader or taking a franchise. Level 1 (1-3 marks) Has commented on the purchase of a franchise by Mrs Ney with/without an opinion. Mrs Ney is facing competition. She could lose her business. She should consider a franchise. A franchise would mean that she had help with her finances and her supplies. She will have to pay royalties. She will have to work hard. There might be less risk of failure.