Explain two advantages and two disadvantages of PH being a public limited company.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2023). The mark or mark type is shown in brackets.

1. [1] Advantage: Can sell shares to the public.
2. [1] Explanation: Which may be attractive to prospective shareholders as this business has a long history of producing high quality products.
3. [1] Advantage: Limited liability.
4. [1] Explanation: Giving protection to the assets of shareholders when the business is expanding in other countries.
5. [1] Advantage: Continuity.
6. [1] Explanation: If shareholders die their shares will be passed on to others which has allowed the company to exist for over 50 years.
7. [1] Advantage: Higher status.
8. [1] Explanation: May find it easier to borrow from banks.
9. [1] Advantage: Rapid expansion possible / can raise large amounts of capital.
10. [1] Advantage: Incorporated identity / separate legal identity.
11. [1] Disadvantage: Legal formalities.
12. [1] Explanation: For this business that manufactures protective hats.
13. [1] Disadvantage: Accounts have to be published.
14. [1] Explanation: Which may be viewed by competitors that want to become the market leader instead of PH.
15. [1] Disadvantage: Divorce between ownership and control.
16. [1] Explanation: Potential conflict between managers and shareholders.
17. [1] Disadvantage: Risk of a takeover.
18. [1] Explanation: No control over who buys shares.
19. [1] Disadvantage: Directors' decision making may be influenced by major investors.
20. [1] Explanation: When seeking to satisfy their own objectives.
21. [1] Quality control - Advantage: Products checked at the end of the production line tries to eliminate faults and errors before the customer receives the protective hats.
22. [1] Quality control - Advantage: Less training is required for the 100 workers as inspectors check the quality of the hats before they leave the factory.
23. [1] Quality control - Disadvantage: It raises costs as inspectors need to be employed.
24. [1] Quality control - Disadvantage: Identifies faulty hats at the end of the process but does not identify where the fault has occurred.
25. [1] Quality control - Disadvantage: If PH does not identify the fault, then it does not eliminate the faulty process - higher costs if protective hats need to be scrapped/reworked.
26. [1] Quality control - Disadvantage: Employees may be demotivated as quality checks are not their responsibility and so do not feel trusted - possibly making more careless errors when carrying out their tasks.
27. [1] Quality assurance - Advantage: Products checked at every stage of the production process to try to eliminate faults or errors at each stage of production before passing to the next stage - reducing faults at the end.
28. [1] Quality assurance - Advantage: There are fewer customer complaints of faulty protective hats.
29. [1] Quality assurance - Advantage: Reduced costs of wastage as fewer hats are scrapped due to being faulty.
30. [1] Quality assurance - Advantage: Can make workers feel trusted and may improve motivation.
31. [1] Quality assurance - Disadvantage: Can be expensive to train employees to check the quality of their own work.
32. [1] Quality assurance - Disadvantage: The reliability of employees is important, and they need to be committed or quality assurance will not be effective.
33. [1] Quality assurance - Disadvantage: Takes longer to produce protective hats as each worker needs to do their own check for faults.
34. [1] Quality assurance - Disadvantage: Components and raw materials need to be of an approved standard to comply with quality assurance - may restrict the suppliers that can be used - possibly increasing costs.
35. [1] Quality assurance - Disadvantage: Employees may expect to be paid more to carry out the quality checks as they are currently only on the minimum wage.
36. [1] Justification: If the process to produce protective hats is simple, then quality control may be most suitable as inspectors may just carry out a simple check at the end of the production line. The 100 production workers do not need to be trained to check their own work, reducing training costs, which they would have to do if quality assurance was used. This makes the production process faster than if quality assurance is used as production workers would need to keep checking the hats at each stage of the production process.
37. [1] Justification: Quality assurance is best because each stage of production can be checked so it is less likely for a faulty product to go to customers than if quality control is used. It keeps a good brand image and reputation for PH products which is very important for protective hats. It will ensure faults do not need to be repaired, reducing cost of faulty products being scrapped.