Identify and explain two ways GS can increase added value.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [8] Identify and explain two ways GS can increase added value.
2. [2 × 1] Knowledge – award one mark for each way
3. [2 × 1] Analysis - award one mark for a relevant explanation of each way
4. [2 × 2] Application – award two application marks for each way
5. Award one mark for each way (maximum of two).
6. ∞ Increase price (1) – explained why/how prices can be increased (1) such as: – improve quality of products such as plant pot containers – improve reputation – establish brand image – improve product features such as excellent customer service
7. ∞ Reduce raw material costs (1) explanation of how these can be reduced (1) such as: – buy cheaper sources of flowers / find cheaper suppliers – lower the quality of inputs such as cheaper seeds – reduce the amount of inputs needed, e.g. less fertiliser
8. Award a maximum of three additional marks for each explanation – 2 of which must be applied to this context – of the way.
9. Indicative response: Reduce raw material costs (k) such as buy cheaper seeds and fertilizer (ap). GS could change to a cheaper supplier of flowers, plants and trees. (ap) This will increase the gap between price and input costs and therefore increase added value. (an)
10. Possible application marks: Partnership; set-up last year; set up by 2 brothers; grows plants and trees; partners invested $5000 each; looks after the gardens of luxury hotels; holds high level of inventory; information on the three sites in the case; information from Appendix 1; information from Appendix 2; information from Appendix 3; gardeners maintaining a good reputation for the business.
11. There may be other examples in context that have not been included here.
12. [12] Consider the following three pricing strategies GS could use when selling plants and trees to customers. Recommend which is the best pricing strategy to choose to increase GS's profit. Justify your answer.
13. Relevant points might include:
14. Advantages: Cost-plus: Easy to apply; Ensures costs covered
15. Advantages: Competitive: Sales high as price at realistic level
16. Advantages: Promotional: Useful for getting rid of old plants/not selling well; Help to renew interest if sales falling; Attracts more customers
17. Disadvantages: Cost-plus: Lose sales if costs higher than competitors
18. Disadvantages: Competitive: Research costs to compare prices; Does not take account of different quality product; Many competitors established in the market
19. Disadvantages: Promotional: Sales revenue will be lower as price of each item low
20. Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.
21. Level 3: At least 2 x Level 2 + 9-10 marks for well justified recommendation as to which pricing strategy to choose to increase profit and why not the other strategies. 7-8 marks for some limited judgement shown in recommendation as to which pricing strategy to choose.
22. Level 2: 4-6 marks Discussion of advantages and/or disadvantages of each pricing strategy.
23. Level 1: 1-3 marks Outline advantages and/or disadvantages of each pricing strategy.
24. Level 1 - 1 mark for each L1 statement (max of 3 marks) e.g. Competitive pricing will increase sales as prices are set at similar level to competitors.
25. 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. Competitive pricing will increase sales as prices are set at a similar level to competitors and may attract customers from competitors. More people will buy their garden products from GS as they set high quality standards for all their plants and trees and their gardening services. (4 marks for one L2 answer plus one application mark for referring to high quality gardening services)
26. Level 3 - For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation of which pricing strategy to choose.
27. Award up to 2 additional marks for relevant application
28. Possible application marks: GS sells plants at the lowest prices available; finest quality plants; partnership; set-up last year; set up by 2 brothers; new business; looks after the gardens of luxury hotels; similar gardening businesses; holds high level of inventory; information from Appendix 1; information from Appendix 2; information from Appendix 3.
29. There may be other examples in context that have not been included here.