EQR owns 150 cafes. It sells a range of drinks including coffee. Being ethical is important to EQR. The Managing Director has been analysing EQR's statement of financial position. The business has the objective to increase its 6% market share. The Managing Director plans to grow the business by selling franchises for $85000. She is also considering ways to increase added value.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [2] Percentage of total market sales held by one brand/business
2. OR [2] The revenue of a business expressed as percentage of total market revenue
3. OR [2] Percentage of total sales that a firm achieves in a market
4. OR [2] Business sales / total market sales × 100
5. Partial definition e.g. share of all sales made [1]
6. OR Percentage of customers/sales a business has [1]
7. [2] Shows the value of a business' assets and liabilities at a particular point in time
8. OR [2] An accounting statement that records assets, liabilities, and owners' equity/capital of a business at a particular date
9. Partial definition e.g. shows assets and liabilities (of a business) [1]
10. OR What a business owns and owes [1]
11. Award 1 mark for each relevant way (max 2).
12. Award 1 mark for each relevant reference to this business (max 2).
13. Increase prices [k] at its cafes [app]
14. Reduce material/variable costs [k] of coffee [app]
15. Branding/change packaging [k] which can also help when selling its franchises [app]
16. Excellent/better service [k]
17. Additional product features/improve design [k]
18. Convenience [k]
19. Other appropriate responses should also be credited.
20. Award 1 mark for identification of each relevant advantage (max 2).
21. Award 1 mark for each relevant reference to this business (max 2).
22. Award 1 mark for each relevant explanation (max 2).
23. Franchise fee must be paid / licence has to be bought [k] for a cafe [app] providing funds for investment [an]
24. Can expand at a faster rate [k] which can help increase its market share [an] above 6% [app]
25. Receives royalties / share of (franchisee) profit [k] as well as the $85000 [app]
26. Not/franchisees responsible for day-to-day management [k] so have time to focus on other issues [an] such as increasing added value [app]
27. Increase brand awareness [k] of it being ethical [app] increasing sales [an]
28. Other appropriate responses should also be credited.
29. Award up to 2 marks for identification of relevant points.
30. Award up to 2 marks for relevant development of points.
31. Award up to 2 marks for a justified decision as to whether a business being ethical will always lead to lower profits.
32. Enhance reputation/brand image [k] helps attract customers [an]
33. Customers may pay higher prices [k] increasing revenue / which could help cover the costs [an]
34. Can help motivate employees [k] increasing productivity / reduces absenteeism / lowers labour turnover [an]
35. Can increase costs [k] leading to higher prices [an] which may lead to fewer customers / sales [an]
36. May not be sufficient materials / difficult to find ethical suppliers [k] reducing output [an]
37. Ethical suppliers may have higher prices / unethical suppliers may be cheaper [k]
38. Other appropriate responses should also be credited.
39. Justification might include: Some customers may be prepared to pay extra for ethical products [k] this can help offset the increase costs of trying to be ethical [k] so overall profit margin may not change [an] and the better reputation gained could result in additional sales [an]. Therefore, being ethical can benefit a business as in the long term this may increase revenue [eval] which could result in higher profit overall [eval].