Explain two ways SSM can grow.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2021). The mark or mark type is shown in brackets.

1. [1] (a) Award 1 mark for a way (maximum of 2 marks).
2. [1] (a) Award a maximum of 3 additional marks for each explanation of the way SSM can grow – one of which must be applied to this context.
3. Relevant ways of internal growth might include:
4. [1] (a) SSM can increase the size of its own factory / build other factories / acquire assets – it could use its own funds such as retained profit – to expand production / output
5. [1] (a) Finding new markets for its products / sell to a wider market / sell overseas
6. [1] (a) Diversification
7. [1] (a) Develop new products
8. Relevant ways of external growth might include:
9. [1] (a) Take over another business – quickly acquires the assets of the other business to increase size
10. [1] (a) Merger
11. [1] (a) Horizontal integration
12. [1] (a) Vertical integration
13. [1] (a) Conglomerate integration
14. [1] (a) For example: Internal growth (1) a business could decide to expand its own factory (1) new machinery could be purchased to increase production (1). SSM plans to spend $15 million to expand in this (app).
15. Application might include: SSM is a public limited company; set up 25 years ago; manufacturer of soap powder; 60 production employees; total of 100 employees; directors have already decided to expand the factory; will need $15 million; may take over a competitor; start selling soap powder in other countries; many existing manufacturers in other countries; benefit from economies of scale.
16. 2(b) Level 3 [9-12] Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both methods. Well-justified recommendation. Candidates discussing both methods in detail, in context and with a well-justified recommendation including why the alternative method was rejected should be rewarded with the top marks in the band.
17. 2(b) Level 2 [5-8] Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one method. Judgement with some justification / some evaluation of choices made. Candidates discussing one or more methods in detail and applying them to the case should be rewarded with the top marks in the band.
18. 2(b) Level 1 [1-4] Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the methods with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both methods in context should be rewarded with the top marks in the band.
19. 2(b) Level 0 [0] No creditable response.
20. Relevant points might include:
21. Primary market research Advantages
22. • Up to date
23. • Relevant to the business – find out opinions / more detailed information from potential customers
24. • Focus is on the business carrying out the research – can gather qualitative data on preferences for washing clothes
25. • Not available to other businesses
26. • Effective way to gather specific information as a questionnaire can focus on the information about the soap market required by SSM – making it more reliable
27. Secondary market research Advantages
28. • Usually much cheaper than primary research to gather information
29. • It is often better than primary research to assess the total size of the market for products to wash clothes by using government population statistics
30. • Quicker/easier to obtain than primary research
31. • Can be the total soap market if using government census data
32. • May be able to observe trends over time
33. Recommendation
34. • If the total size of the soap powder market is required, then secondary research methods will be the most effective. Government statistics will provide information on the total number of people in specific age groups and where they are located in the country. Primary research is unlikely to be carried out over the whole country and data will be more localised so less useful.
35. • Primary research will be better if specific information on the needs and wants of customers habits for washing clothes is required as questions can be focused on the specific products produced by SSM or their competitors soap products.