Identify and explain one advantage and one disadvantage to WA of developing new products.

Mark scheme

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

1. [8] Knowledge - award one mark for each relevant advantage / disadvantage [2 x 1 marks]
2. [8] Analysis - award one mark for a relevant explanation for each advantage / disadvantage [2 x 1 marks]
3. [8] Application - award two application marks for each advantage / disadvantage [2 x 2 marks]
4. [8] Answers are likely to include: Advantage: New markets
5. [8] Advantage: Maintains image for fashionable designs
6. [8] Advantage: Remains competitive
7. [8] Advantage: Expansion
8. [8] Advantage: Wider range of products / diversification / spreading risk
9. [8] Advantage: Attract more customers / increase sales
10. [8] Disadvantage: New products might fail
11. [8] Disadvantage: May not be demanded if not liked by consumers
12. [8] Disadvantage: Increased costs – for example development costs / marketing / advertising / market research / storage or warehouse costs / wasted raw materials during development / training labour in new skills
13. [8] Disadvantage: Higher prices needed to recoup development costs
14. [8] Indicative response: WA will remain competitive (k) by ensuring the furniture is fashionable (ap). This will increase demand or at least maintain demand for its furniture (an) and may result in profit increasing again (ap).
15. [8] Possible application marks: Family owned Itd company; small business; started 10 years ago; furniture; wood from sustainable forests; uses batch production to make furniture; new fashionable designs each year; selling price $200; environmentally friendly business objective; reduced profit in 2018; chairs / tables
16. [12] Relevant points might include: Be an environmentally friendly business - Advantages: Improved brand image – may attract ethical customers – increase sales
17. [12] Be an environmentally friendly business - Advantages: Less likely to break government regulations on environmental damage
18. [12] Be an environmentally friendly business - Advantages: Employees may prefer to work for an ethical business
19. [12] Be an environmentally friendly business - Advantages: Avoids WA having to deal with pressure groups
20. [12] Be an environmentally friendly business - Disadvantages: May have a higher cost –higher price for furniture
21. [12] Be an environmentally friendly business - Disadvantages: Less competitive especially if competitors do not use sustainable wood
22. [12] Increase market share - Advantages: Increase sales – higher revenue and profit
23. [12] Increase market share - Advantages: More dominant in the market – more influence on price
24. [12] Increase market share - Disadvantages: Increased cost of marketing
25. [12] Increase market share - Disadvantages: Marketing costs may be higher than improvement in sales and revenue
26. [12] Increase market share - Disadvantages: Increase in WA sales may not increase market share if market is growing at the same rate
27. [12] Survival - Advantages: Avoids making a loss – costs are covered
28. [12] Survival - Advantages: Easier to achieve than other objectives – just needs to aim to break-even
29. [12] Survival - Advantages: Protects family investment
30. [12] Survival - Disadvantages: Long term not good as low / no retained profit this is usually a short-term objective
31. [12] Survival - Disadvantages: May need to borrow externally if low profit
32. [12] Award up to 10 marks using the levels-based mark scheme below.
33. [12] Level 3: At least 2 x Level 2 + 9–10 marks for well justified conclusion as to which is the most important and why the other objectives will be less important in the long run. 7–8 marks for some limited judgement shown in conclusion as to which objective will be most important in the long run.
34. [12] Level 2: 4–6 marks Detailed discussion of the advantages and/or disadvantages of each objective.
35. [12] Level 1: 1–3 marks Outline of the advantages and/or disadvantages of each objective.
36. [12] Level 1 - 1 mark for each L1 statement (max of 3 marks) e.g. Improved brand image if aim to be environmentally friendly
37. [12] Level 2 - 1 x L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Improved brand image if is to be environmentally friendly and this may attract an increased number of customers who are concerned about environmental damage and want to support ethical businesses. However, this might be more expensive, for example when buying the wood and so prices may have to be increased. (L2 plus application for mentioning buying wood)
38. [12] Level 3 - For L3 to be awarded there needs to be at least two L2 marks awarded and then a conclusion of which objective will be most important in the long run.
39. [12] Award up to 2 additional marks for relevant application.
40. [12] Possible application marks: Family owned Itd company; small business; started 10 years ago; furniture; wood from sustainable forests; new fashionable designs each year; individually designed furniture produced using job production; selling price $200 and $250 per item; ethical business objective; reduced profit in 2018; chairs / tables; high cost of wood; uses cost-plus pricing; WA price is higher than competitors, 10% market share