Explain two reasons why having business objectives is important to Gemma.

Mark scheme

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

1. Award 1 mark for each relevant reason (maximum of two):
2. Relevant reasons might include:
3. A clear target/aim/purpose for owner to work towards – guides the business in the right direction - avoids loss of focus
4. Decision-making will be focused on the objectives – meaning better decisions are taken - the business would be more efficient
5. Clear objectives will help focus the employees and management on the same goal - helps motivate employees - making it more likely to be achieved
6. Allows measurement of success - can judge performance or progress
7. Comparison of performance - so business managers at each shop can compare how the shop has performed against their objective(s) - to see whether or not it has been successful
8. Award a maximum of 3 additional marks for each explanation – one of which must be applied to this context.
9. Indicative response:
10. An objective is a target to work towards (1) and Gemma has set the objective of increasing sales (app). By setting this objective all the employees can try to find ways to increase sales (1), which should ensure all the employees and managers work towards a common goal making it more likely to be achieved. (1)
11. Application could include: increase market share, increase sales by 10% each year, jewellery, rings and bracelets, she plans to open a second shop.
12. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology.
13. Detailed discussion of both the advantages and disadvantages of buying a franchise.
14. Well-justified conclusion.
15. Candidates discussing advantages and disadvantages in detail, in context and with well-justified conclusion, including why the alternative argument was rejected, should be rewarded with the top marks in the band.
16. Relevant points might include:
17. Advantages:
18. It is a known jewellery brand so the chances of business failure are reduced
19. The franchisor pays for advertising on national television and national newspapers lowering Gemma's marketing budget
20. All jewellery supplied by franchisor so don't need to find suppliers saving Gemma time
21. Training employees and Gemma will be provided by the franchisor saving costs
22. Banks more willing to lend as it is a lower risk of failure
23. Disadvantages:
24. High cost of $50000 per year paid to franchisor
25. Payment each year of 20% of gross profit – less profit for Gemma
26. Less independence in decision making
27. Cannot sell other jewellery - restricts supplies in the shop
28. Conclusion Justification might include:
29. No, as Gemma cannot take her own decisions and she has done well so far with the original jewellery shop. She should choose to sell whatever jewellery she wants and keep all the gross profit for herself, even though the franchise may be more popular and overall sales may have been higher, as she may have more gross profit to keep.
30. Yes, as a relatively new business of 5 years buying a franchise will make it much easier to obtain finance from the bank to use for the expansion.