Abdula manages a business partnership that makes sports clothing. The business is working at full capacity. It employs 12 people who are paid on a piece rate basis. The partners have an objective to increase profits by 10% each year for the next 5 years. They are thinking about a joint venture with another manufacturer of sports clothing as one way of achieving this objective.

Mark scheme

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

1. [2] Clear understanding: e.g. where two or more people jointly agree to own the business
2. [1] Some understanding: two or more people run / operate the business OR identifies a relevant feature
3. [1] Features alone max e.g. unlimited liability, no separate legal identity
4. [2] Application [2 × 1] award 1 mark per way
5. Ways might include – time rates, bonus payments, salaries, profit sharing, performance related pay
6. Do not accept commission, as not appropriate for a manufacturing business
7. [2] Knowledge [2 × 1] - award 1 mark for each advantage
8. [2] Application [2 × 1] – award 1 mark for each relevant explanation in context (i.e. explain how the points generate advantages for this business)
9. Points might include:
10. Measure of success [k] if achieve the 10% increase in profit they will know it has been a good year [app]
11. Helps decision making / planning / budgeting [k] for a (possible) joint venture / increasing profits [app]
12. Gives sense of purpose and direction [k] so able to take decisions/allocate resources effectively to ensure hit its annual target [app]
13. Aim or target [k]
14. Motivate [k].
15. [2] Knowledge [2 × 1] -award 1 mark for each advantage identified
16. [2] Application [2 × 1] – award 1 mark if relevant reference made to this business
17. [2] Analysis [2 × 1] - award 1 mark for each relevant explanation (e.g. show how the points represent an advantage to an individual business)
18. Points might include:
19. Share expertise / ideas [k] as partnership is likely to have few specialists [app] this might enable them to make better decisions [an]
20. Reduced capital needs / share costs [k] as both companies contribute [an]
21. Wider range of contacts / better access to resources [k] as likely to know different clothing suppliers [app] so might be able to obtain cheaper / different materials [an]
22. Help enter new market [k] allowing further sales [an] which could help them achieve 10% target [app]
23. Reduces business risk for partners [k] who have unlimited liability [app] because more markets to rely on / as able to share losses[an]
24. Share assets [k] as can use other factory [app]
25. Build reputation [k]
26. Increase output [k] as at full capacity [app].
27. Do not accept sports clothing or manufacturer as application as it is stated in the question.
28. [2] Knowledge [2 × 1] award 1 mark for each relevant way identified
29. [1] Application [1] – award 1 mark if relevant reference made to the business
30. [1] Analysis [1] – award 1 mark for relevant development of point(s)
31. [2] Evaluation [2] – justified decision made as to which method is likely to be most successful to help it achieve its objective of 10%
32. For 6 marks must explain why it is the better option (comment on its feasibility or why more appropriate)
33. Points might include:
34. Target new markets / segments [k] such as make items for different sports [app]
35. Develop new products [k] to attract new customers [an]
36. Increase sales revenue [k] by advertising / attract more customers [an]
37. Change price [k]
38. Improve Efficiency methods [k] so cutting waste [an];
39. Automation [k] replacing some of its 12 employees [app] so lower wage cost [an]
40. Find cheaper supplier [k] which lowers cost of sales [an]
41. Merger / takeover [k] as buy supplier to get cheaper materials [app] which could lower cost of sales [an].
42. Application might include: sports products/ clothing, 12 employees, materials, full capacity.
43. Developed example:
44. They could advertise [k] so attracting more shops to stock their products [app] increasing sales revenue [an]. Alternatively, they could increase prices. [k] However this could reduce competitiveness as customers will look for cheaper options elsewhere so advertising is better [eval].