Identify and explain two advantages and two disadvantages of GT being a public limited company.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [1] Limited liability
2. [1] Incorporated business with separate legal identify
3. [1] Shares can be issued to the general public
4. [1] Opportunity to raise very large sums of capital
5. [1] No restrictions on buying, transferring or selling of shares
6. [1] High status and easier to attract suppliers
7. [1] Quite complicated legal formalities
8. [1] Many regulations and controls including publication of accounts/accounts can be seen by competitors
9. [1] Selling shares to the public is expensive
10. [1] Danger the owners may lose control if too many shares are issued/risk of takeover
11. [1] Explanation of an identified advantage (up to 2 marks)
12. [1] Explanation of an identified disadvantage (up to 2 marks)
13. [1] Advantage of selling to large shops: Already established channel of distribution and links with retailers
14. [1] Advantage of selling to large shops: Easier to use in store promotions as already has relationship with retailer
15. [1] Advantage of selling to large shops: Lower delivery costs compared to online
16. [1] Disadvantage of selling to large shops: Harder to expand sales if using the same channels and not new ones
17. [1] Disadvantage of selling to large shops: May sell many competing goods in shops alongside GT toys
18. [1] Advantage of selling online: Sell to a wider range of customers
19. [1] Advantage of selling online: Customers can access all the range of products
20. [1] Advantage of selling online: Lower price as no retail profit margin
21. [1] Advantage of selling online: Possibly allows prices to be reduced to make the toys more competitive
22. [1] Disadvantage of selling online: May lose existing customers if they want to see and handle toys before buying
23. [1] Disadvantage of selling online: May not have a cost-effective delivery network available
24. [L1] 1 mark for each L1 statement (max of 3 marks) (E.g. Lower price as no retail profit included.)
25. [L2] Detailed discussion of the advantages and disadvantages of each option. (1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks))
26. [L3] For L3 to be awarded there need to be at least 2 L2 marks awarded and then a recommendation which justifies which channel of distribution to choose. (7-8 marks for some limited judgement, 9-10 marks for well justified recommendation)
27. [App] Award up to 2 additional marks for relevant application.
28. [App] Possible application marks: manufacturer of toys; toys sold to large toy shops throughout country Y; 200 different designs; teddy bears; toy cars; building blocks; suitable for babies/young children; toys also exported; Marketing manager wants to only sell toys online; toys manufactured using batch production; design and packaging of toys need to be adapted for each different export market; sells well designed toys of high quality; education and safety of children are GT's main priorities; recent price increases have resulted in falling sales, selling online will help prevent any communication barriers.