Baba is a large fashion retailer with many branches. Baba imports all the clothing it sells from manufacturers in neighbouring countries. It uses its own vehicles to transport goods by road from these manufacturers to its central warehouse. Baba has introduced a sales promotion in its stores: [Figure 3] SPECIAL OFFER Spend More Than $40 and Obtain 5% Discount BUY NOW

Mark scheme

Marking points from the official mark scheme (May/June 2016). The mark or mark type is shown in brackets.

1. [4] 6 (a) (i) Two benefits stated (1 mark each) with explanations (1 mark each)
2. Provides direct contact with customer (1) enables better customer relations (1)
3. Better supervision of goods (1) with own driver/less theft (1)
4. Delivery times/routes (1) are flexible/not dependent on others (1)
5. Advertising on side of vehicle (1) can promote the business (1)
6. Less documentation (1) compared to using a transport company (1)
7. Extra income can be generated (1) by carrying other businesses' goods/hiring out own transport (1)
8. More economic (1) if regular loads (1)
9. Accept any other relevant point
10. [4] (ii) Up to 4 marks for explanation
11. Baba has many branches (1) therefore a central warehouse will reduce the amount of stock held in the branches (1) branches can be supplied quickly (1)
12. When transporting from the neighbouring country it only has one destination (1) This reduces administration costs (1)
13. Reduces the necessity to have storage space attached to retail shops (1) where rents will be high (1)
14. Central warehouse can be in an industrial area (1) saving costs (1)
15. Saves renting out someone else's warehouse (1) which may be not very central (1)
16. Will act as regional distribution centre (1) where all retailer goods will be stored (1)
17. Accept any other relevant point
18. [2] (b) (i) Any two points
19. Import tariffs are imposed by governments to generate revenue/to assist home producers to compete against foreign goods (1)
20. Baba will be affected because the tariff will increase the cost (1) of the clothes that are in their warehouse and shops (1) resulting in less sales/less demand (1)
21. Accept any other relevant point
22. [2] (ii) Any two points
23. Import quotas are physical limits on the amount of goods allowed to be imported per year (1)
24. If Baba's purchases are restricted by a quota, they may not be able to meet demand/unless they can buy from a domestic manufacturer (1) resulting in less sales (1)
25. Accept any other relevant point
26. [2] (c) (i) Two marks for the correct answer (1 mark for identifying that discount is 5% of $120)
27. $120 × 5%=$6 (1)
28. $120 - $6=$114 (1)
29. [6] (ii) Level 2 (4-6 marks) Has discussed whether or not Baba should offer sales promotions to its customers and has given a reasoned opinion (If a candidate has presented a one-sided argument, award 4 marks max.)
30. Level 1 (1-3 marks) Has commented on the use of sales promotions with/without an opinion
31. Sales promotion is an attempt to boost sales, often over a short term
32. Sales promotions are discounts, competitions, free gifts, free samples etc.
33. Sales promotions cost money and therefore reduce profitability
34. However, if the sales revenue increases, this should lead to increased profitability.
35. As Baba sells fashions it must be very careful to minimise obsolete stock, therefore, sales promotions will be used to move obsolete stock and to attract customers into the shops
36. Accept any other relevant point