DSY is a private limited company. It produces washing machines and cleaning equipment. The Managing Director wants DSY to expand into a different market. He plans to spend $2bn on developing electric cars. There is a lot of competition in the electric car market. This market is growing rapidly. A leading pressure group has identified the environmental problems of non-electric cars. The Managing Director knows that important decisions about the method of production and the new car's brand image still have to be made.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2020). The mark or mark type is shown in brackets.

1. [2] Group formed by people with a common interest who take action to change/ influence business decisions or government policies.
2. [2] Organisations of like-minded people who put pressure on businesses and the government to change their policies to reach a predetermined objective
3. [1] Partial definition e.g. group formed by people with a common interest
4. [1] Do something to change business decisions/government policies
5. [2] Identity/logo/unique name of a product that distinguishes it from other brands
6. [2] The general impression/perception/reputation of a product held by consumers
7. [1] Partial definition e.g. identity given to a product (which gives it a personality of its own)
8. [1] Something that distinguishes a product from its competitors
9. [1] How the product is seen/perceived by others
10. [1] Access to more capital (than unlimited company)/can raise capital by selling shares [k]
11. [1] to start making cars [app]
12. [1] Control over who buys shares/less risk of takeover (than public limited company) [k]
13. [1] which may be important as there is a lot of competition [app]
14. [1] Continuity of existence [k]
15. [1] Separate legal identity [k]
16. [1] (Its shareholders benefit from) limited liability/incorporated [k]
17. [1] Access to/amount of capital available/cost of machinery [k]
18. [1] as may not be able to afford to set up flow production [an]
19. [1] when already planning to spend $2bn [app]
20. [1] Level of demand/size of market/volume needed [k]
21. [1] as there is a lot of competition [app]
22. [1] may not be able to sell/need to produce a large number [an]
23. [1] Nature/type of product [k] as cars [app] are more likely to be mass produced to be more cost-efficient/if luxury then job production might be suitable [an]
24. [1] Access to/amount of suitable space (inside the factory) [k]
25. [1] Access to (suitable/skilled) employees [k]
26. [1] Possible environmental damage/impact/pollution [k]
27. [1] which leads to protests by pressure groups [app]
28. [1] which could damage its reputation/ potential sales [an]
29. [1] How efficient is the method of production/amount of waste [k]
30. [1] Shows high potential demand/many potential customers [k]
31. [1] could lead to an increase in revenue [an]
32. [1] Have to do something different to make your product 'stand out'/ customers may be brand loyal to other businesses/ more choice [k]
33. [1] leading to higher/lower sales [an]
34. [1] leading to higher/lower revenue [an]
35. [1] Allow the business to spread risk [k]
36. [1] Difficult to charge high prices/may have to set lower prices (than competitors) [k]
37. [1] lowering the profit margin/so difficult to break-even [an]
38. [1] (Additional) costs of promotion/market research [k]
39. [1] leading to higher expenses [an]
40. [1] Makes the business be more efficient [k] to reduce average costs [an]
41. Other options might include: Develop new products [k], Expand in existing market [k], Find new market with low/no competition [k] provides chance for monopoly (as no competition) [an], Take over a competitor [k] so gain their market share [an]
42. Justification might include: A growing market shows high potential demand [k] so possible to earn enough revenue to recover costs [an]. However, if there is a lot of competition then it might be difficult to charge high prices [k] and this might lower the profit margin [an] which could make it difficult to recover the cost of developing new products [an]. It will depend on how good its product is because if customers are interested in what the business is offering, they may be prepared to buy it despite the competition so in this situation it is worth the risk as they would be able to gain market share to justify the costs of expansion.[eval] [eval]