RRM is a small business. Identify and explain two reasons why RRM might remain small.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2015). The mark or mark type is shown in brackets.

1. [8] Knowledge [2 × 1] – award one mark for each reason
2. [8] Analysis [2 × 1] - award one mark for a relevant explanation for each reason
3. [8] Application [2 × 2] – award two application marks for each reason
4. [8] Award one mark for each relevant reason (maximum of two), such as:
5. [8] • Lack of demand/market size
6. [8] • Owner wants the business to remain small/owner objective
7. [8] • Lack of capital for investment
8. [8] • Offers a personal service
9. [8] • Close contact with customers
10. [8] • Close contact with employees
11. [8] • Wants to keep the business in family ownership/control
12. [8] • Easier to control
13. [8] • Less stressful
14. [8] Award a maximum of three additional marks for each explanation – 2 of which must be applied to this context.
15. [8] Indicative response: A lack of demand (k) as the motorbikes may not have a large number of potential customers in the local area (ap). Without a large demand there is no point in trying to expand (an) to sell large number of motorbikes and so the business will remain small (ap).
16. [8] Possible application marks: sole trader; motorbikes; bikes; family owned business; started 15 years ago; cannot afford to buy car; located 100 km from Main City; 10 workers employed; repair, sell and deliver motorbikes; customers are mainly young men; Rafael's son is taking over the business.
17. [8] There may be other examples in context which have not been included here.
18. [12] Relevant points might include:
19. [12] Age: Advantages: Easy to segment the market; Can target different age groups with different products; Different styles/models appeal to different ages. Disadvantages: Other age groups may be omitted from sales as advertising is not seen by them; Particular age groups may not like the same models/income levels different.
20. [12] Income group: Advantages: Can target lower and higher income groups with different prices/quality; Targeting promotion at these groups makes it more effective. Disadvantages: Lower income groups may not be able to afford the motorbikes; Other income groups may not buy the motorbikes as do not know about them.
21. [12] Gender: Advantages: Males already the main customers; Change designs to appeal to both genders; Advertising made to appeal to male interests. Disadvantages: Lose a large potential market as feel the product is not for them; Half the population are women and not being targeted at the moment; Expensive to stock different models to target different segments.
22. [12] Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.
23. [12] Level 3: At least 2 x Level 2 + 9-10 marks for well justified recommendation as to the most effective method to segment the market and a comparison justifying why the alternative methods are rejected.
24. [12] Level 2: 7-8 marks for some limited judgement shown in recommendation as to the most effective method to segment the market. 4-6 marks Detailed discussion of a range of advantages and disadvantages of age, income and gender groups as methods to segment the market.
25. [12] Level 1: 1-3 marks Outline of advantages and disadvantages of age, income and gender groups as methods to segment the market. 1 mark for each L1 statement (max of 3 marks) e.g. Promotion targets young age groups
26. [12] Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Promotion targets young age groups which are most likely to be customers of RRM. By targeting a particular age group the advertising is likely to be effective and put in places which are seen by the target age group that will lead to increased sales of motorbikes. (4 marks for L2 answer + 1 application mark for mentioning young age groups and motorbikes).
27. [12] Level 3 - For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation which justifies which is the best method to choose.
28. [12] Award up to 2 additional marks for relevant application.
29. [12] Possible application marks: motorbikes; located 100 km from Main City; repair, sell and deliver motorbikes; customers are mainly young men; imports high quality motor bikes; wants to open a new showroom; cars; scooters; bicycles; reference to population statistics from appendix 1; financial information from appendix 2; accessories for motorbike riders.
30. [12] There may be other examples in context which have not been included here.