Explain two reasons why PPE may remain small.

Mark scheme

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

1. [1] The product is specialised – produced using job production / not suitable to be produced on a large scale – customer preference would be lost / designed to needs of customer.
2. [1] Market size - doesn't have a large market / sales are low - output therefore on a small scale.
3. [1] Owner's objectives / owner's preference / owner wants the business to remain small – to keep a work life balance.
4. [1] Easier to manage / control - may not want the stress / does not have the personal skills to manage a larger business - keeps closer links with employees and customers.
5. [1] Lack of finance / fewer finance options for a sole trader.
6. Each explanation for a reason is awarded up to [3] marks, including application to the case study context.
7. [1] Sole trader - Advantages: Few legal regulations.
8. [1] Sole trader - Advantages: Kaari will be her own boss and she wants the business to remain small.
9. [1] Sole trader - Advantages: Freedom to choose own hours/holidays etc.
10. [1] Sole trader - Advantages: Close contact with retailers and government customers.
11. [1] Sole trader - Advantages: Keeps all the profits.
12. [1] Sole trader - Advantages: Financial information kept private.
13. [1] Sole trader - Disadvantages: No one else to discuss business decisions with.
14. [1] Sole trader - Disadvantages: Does not have limited liability.
15. [1] Sole trader - Disadvantages: Lacks capital to expand and needs $20 000 for new equipment.
16. [1] Sole trader - Disadvantages: No one to help if she is ill – so no one to tell the 3 workers what to do.
17. [1] Sole trader - Disadvantages: No continuity.
18. [1] Partnership - Advantages: More capital to invest and will need $20 000 for new equipment.
19. [1] Partnership - Advantages: Responsibility of running the business is now shared and Kaari is performing all the management roles which may be difficult for her.
20. [1] Partnership - Advantages: Losses will be shared.
21. [1] Partnership - Advantages: Each partner may have different skills.
22. [1] Partnership - Advantages: Share risks.
23. [1] Partnership - Disadvantages: Does not have limited liability.
24. [1] Partnership - Disadvantages: Partners can disagree.
25. [1] Partnership - Disadvantages: No continuity.
26. [1] Partnership - Disadvantages: No legal formalities.
27. [1] Partnership - Disadvantages: Share profit.
28. [1] Private limited company - Advantages: Limited liability.
29. [1] Private limited company - Advantages: Shares can be sold to raise capital – may not need to borrow the $20 000 for new equipment.
30. [1] Private limited company - Advantages: Can control who buys shares.
31. [1] Private limited company - Disadvantages: Legal formalities to set up and run.
32. [1] Private limited company - Disadvantages: Finances may not be private.
33. [1] Private limited company - Disadvantages: Can only sell shares to family and friends – limits amount of capital that can be raised.
34. [1] Recommendation: Sole trader as individually designed playground equipment has a limited market and therefore Kaari is likely to keep the business small. She can be her own boss and keep all the profit without having to share with any other owners unlike a partnership. A limited company takes more time and expense to set up and certain legal formalities will need to be followed to run the business which Kaari may not want to follow.
35. [1] Recommendation: Partnership as Kaari is carrying out all the management roles and this may be too much for just one person. So, she prefers to add another person with different skills to help her manage the business as it grows.
36. [1] Recommendation: A larger business may build up more debts and therefore Kaari might want the benefit of limited liability to protect her personal assets and ensure her family of two children are secure.