Karim is an agent who sells goods abroad on behalf of companies. Fig. 4 shows the total value of goods Karim sold on behalf of companies in 2011. [Figure 4 - Pie chart showing Total value of goods sold by Karim in 2011 = $50m. Segments: manufactured goods 45%, food 30%, raw materials 15%, others 10%] Use the information given in Fig. 4 to help you to answer the following questions.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2012). The mark or mark type is shown in brackets.

1. [2] (a) 45 x 50 (1 mark) = $22.5m (1 mark) / 100
2. OFR applies. If the correct answer is given without working, award full marks.
3. [4] (b) Any two points explained x 2 marks each or any four points x 1 mark each:
4. • because of the distances involved
5. • the agent/Karim will need to communicate with buyers
6. • he may use email because it provides a written record
7. • he will need communication methods that are available 24/7 to overcome time zones
8. • he may use the telephone to discuss a consignment
9. • he may need to inform the buyer of when food may arrive – cold storage may be needed
10. • he may set up a teleconference to discuss with the seller and the buyer a particular consignment.
11. Comment may include payments/ordering/complaints/delivery.
12. [6] (c) Level 2 (4-6 marks) Has discussed the use of agents or organising its own export trade by a company wishing to start exporting and has given a reasoned recommendation. NB A one-sided argument can gain full marks.
13. A company wishing to start exporting might use agents as they put buyers in contact with sellers, importers in touch with exporters. The company will be saved all the difficulties and costs of setting up an export department. Using the agent removes many of the risks associated with exporting. The agent will already have contacts, well-established markets and local knowledge and so the company can concentrate on the production of goods rather than looking for buyers.
14. The use of the agent will mean, however, that the company will not receive the full price for the goods. The agent will be paid commission for his services. He may not be able to find a buyer for all the goods the company hopes to export and so the company will have to find a market for them.
15. It may be that initially the company will be well advised to use an agent but as its trade expands, it should consider exporting itself. It will be able to push its own products and produce what the buyers require. I would recommend the use of an agent to start with and then develop its expertise itself in the export trade.
16. Level 1 (1-3 marks) Has commented on the use of agents and/or organising its own export trade with/without a recommendation.
17. Many companies use agents. It is simple and cheap. The agent finds buyers. The company need not worry about exporting and can concentrate on production. It is a good idea.
18. [2] (d)(i) Any two ways x 1 mark each:
19. • accept - use export credit insurance
20. • use letters of credit/documentary credits
21. • ask for a bank draft
22. • do not release the goods until the money/documents have been deposited
23. • accept bill of exchange
24. • electronic transfer/telegraphic transfer/remittances/bank transfer/international money transfer = 1 mark only.
25. [2] (d)(ii) Any two documents x 1 mark each:
26. • bill of lading/air waybill/indent/consular invoice/certificate of origin/export licence/ shipping note/insurance policy or certificate.
27. [4] (e) Any two points explained x 2 marks each or any four points x 1 mark each:
28. • the exporter will need specialised transport for some of the products he sells
29. • he may need bulk carriers to carry the raw materials
30. • he may use either space in a container ship or air freight to transport manufactured goods
31. • he may make use of a freight forwarding agent to arrange the transport for him
32. • he may use air transport to visit buyers and sellers in Australia and in China
33. • he may need transport/road transport to/from the port/airport.
34. NB list of transport methods only = 1 mark max. Candidates may offer a general discussion of the use of ships/air transport that may not be in context - award up to 4 marks max.