Cambridge O Level: Business Studies 7115/21 October/November 2020

Cambridge O Level
BUSINESS STUDIES 7115/21

Paper 2 Case Study October/November 2020
MARK SCHEME
Maximum Mark: 80
Published
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the October/November 2020 series for most
Cambridge IGCSE™, Cambridge International A and AS Level and Cambridge Pre-U components, and some
Cambridge O Level components.
This document consists of 16 printed pages.
© UCLES 2020 [Turn over

7115/21 Cambridge O Level – Mark Scheme October/November
PUBLISHED 2020
Generic Marking Principles
These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.
GENERIC MARKING PRINCIPLE 1:
Marks must be awarded in line with:
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
Marks awarded are always whole marks (not half marks, or other fractions).
Marks must be awarded positively:
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these
features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.
Rules must be applied consistently, e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
Marks should be awarded using the full range of marks defined in the mark scheme for the question
(however; the use of the full mark range may be limited according to the quality of the candidate
responses seen).
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.
© UCLES 2020 Page 2 of 16

PUBLISHED 2020
Question Answer Marks
1(a) Explain two reasons why having business objectives is important to 8

Gemma.
Award 1 mark for each relevant reason (maximum of two):
Relevant reasons might include:

• A clear target/aim/purpose for owner to work towards – guides the
business in the right direction - avoids loss of focus
• Decision-making will be focused on the objectives – meaning better
decisions are taken – the business would be more efficient
• Clear objectives will help focus the employees and management on the
same goal – helps motivate employees - making it more likely to be
achieved
• Allows measurement of success – can judge performance or progress
• 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
Award a maximum of 3 additional marks for each explanation – one of which

must be applied to this context.
Indicative response:
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)
Application could include: increase market share, increase sales by 10% each
year, jewellery, rings and bracelets, she plans to open a second shop.

PUBLISHED 2020
1(b) Consider the advantages and disadvantages of buying the Beautywise 12

franchise. Do you think Gemma was right to buy the franchise? Justify
your answer.
Level Description Marks
3 Sound application of knowledge and understanding of 9–12

relevant business concepts using appropriate terminology.
Detailed discussion of both the advantages and

disadvantages of buying a franchise.
Well-justified conclusion.
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.

Detailed discussion of at least one advantage or

disadvantage.
Judgement with some justification/some evaluation of

choice made.
Candidates discussing the advantages and disadvantages

of buying a franchise in detail and applying it to the case
should be rewarded with the top marks in the band.
1 Limited application of knowledge and understanding of 1–4

relevant business concepts.
Limited ability to discuss the advantages and

disadvantages with little/no explanation.
Simple judgement with limited justification/limited

evaluation of choice made.
Candidates outlining advantages and disadvantages of

buying a franchise in context should be rewarded with the
top marks in the band.
0 No creditable response. 0

PUBLISHED 2020
1(b) Relevant points might include:
Advantages Disadvantages
• It is a known jewellery • High cost of $50 000 per

Buying a brand so the chances of year paid to franchisor
franchise business failure are • Payment each year of
reduced 20% of gross profit –
• The franchisor pays for less profit for Gemma
advertising on national • Less independence in
television and national decision making
newspapers lowering • Cannot sell other
Gemma’s marketing jewellery – restricts
budget supplies in the shop
• All jewellery supplied by
franchisor so don’t need
to find suppliers saving
Gemma time
• Training employees and
Gemma will be provided
by the franchisor
saving costs
• Banks more willing to
lend as it is a lower risk
of failure
Conclusion Justification might include:

• 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.
• 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.

PUBLISHED 2020
2(a) Explain four requirements for the new manager that Gemma should 8
include in the job specification below.
Job specification for the shop manager

Job title: Shop manager
Location: New shop
Details of job: Manage the shop and the employees
Award 1 mark for each relevant requirement (maximum of four):
Relevant requirements might include:

• Experience - of selling jewellery
• Qualification/product knowledge - in retail management/gems
• Skills - e.g. Leadership skills – make sure new employees are well
motived/communication skills – ensuring excellent customer service/
financial skills – make decision about which items of inventory to buy
• Trained – to operate the shop and supervise new employees
• Physical fitness – need to be on their feet all day in the shop
• Personal characteristics – friendly and welcoming to customers buying
rings/easily approachable by customers when entering the new
shop/able to speak the same language as local people in the area where
the new shop is located
Award a maximum of 1 additional mark for each explanation which must be

applied to this context.
For example:
Experience (1) of working in a jewellery shop so that they will know what to
do. (app)
Application could include: operating the shop, making decisions about which
items of inventory to buy, ensuring excellent customer service, ensuring new
employees are motivated.

PUBLISHED 2020
2(b) Consider the advantages and disadvantages of the three towns for the 12
new shop shown in Appendix 3. Recommend which town Gemma
should choose for the location of the new shop. Justify your answer.

Detailed discussion of two or more locations.
Well-justified recommendation.
Candidates discussing the three locations in detail, in

context and with well-justified recommendation, including
why the alternative locations were rejected, should be
rewarded with the top marks in the band.

Detailed discussion of at least one location.

choice made.
Candidates discussing two or more locations in detail and

applying it to the case should be rewarded with the top
marks in the band.

Limited ability to discuss the locations with little/no

explanation.

Candidates outlining the three locations in context should

be rewarded with the top marks in the band.

PUBLISHED 2020
Town A • Comparison of the figures – e.g. highest rent of the

three towns/shortest lease of the three towns (L1)
• Total costs are $130 000 (not including the
franchise payments) (L1)
• Payment of 20% of gross profit to the franchisor is
$80 000 per year (L1)
• The franchise fee of $50 000 is a smaller
proportion of the estimated gross profit than for
town B and C (L2)
• Gross profit is highest and minus expenses profit =
$140 000 (L2)
• Highest total expenses of $260 000 (L2)
Town B • The wages and salaries are $10 000 lower than

town A (L1)
• Estimated gross profit is $100 000 more than town
C (L1)
• Total costs are $110 000 (not including the
franchise payments) (L1)
• Profit = $80 000 (L2)
• Total expenses = $220 000 (L2)
Town C • Heating and lighting is the cheapest of the three

towns (L1)
• Total costs are $83 000 (not including the franchise
payments) (L1)
• Longer lease contract of 15 years increases risk to
the business if the second shop is not successful
(L2)
• Profit = $27 000 (L2)
• Lowest total expenses of $173 000 (L2)
Recommendation Justification might include:

• If Gemma wants the highest profit then Town A is
the one to choose although she will only have the
lease for 5 years and then may need to move. But
she will make nearly twice as much profit as
Town B and over 5 times as much as Town C.
• Town B might be the better one to choose if
Gemma wants to gain a longer lease and is willing
to reduce the profit made to ensure the location for
twice as long as Town A. She will gain more gross
profit than Town C so that will make a greater
contribution to paying the annual franchise fee of
$50 000.
• If Gemma wants to secure a shop for the longest
time then Town C is the best. However, the gross
profit is the lowest at $200 000 but the expenses
are also a lot lower than the other two options.

PUBLISHED 2020
3(a) Explain why liquidity and profitability are important to a business. 8
Award 1 mark for each relevant reason or explanation of the reason for
liquidity and profitability:
Relevant reasons might include:
Liquidity:
• Allows a business to see if it is able to pay back the short-term debts of
the business
• Measured by current ratio/acid test ratio
• If it cannot pay the debts, then it will not be able to buy more inventory or
raw materials
• If the business becomes illiquid it may be forced to sell business assets to
pay debts and will cease trading
Profitability:
• It measures how well profit is being made from sales or capital invested in
the business
• Could be used to reinvest into the business/use retained profits for
expansion
• Measured by gross profit margin/profit margin/ROCE
• It can be a measure of efficiency
• Can compare business performance over time/compare against other
businesses
• It helps investors or bank to decide whether to invest in the business or
lend it money
• Retain shareholders/pay dividends/return on investment for the owners
Award a maximum of 3 additional marks for each explanation. This is a

generic question, therefore there are no application marks available.
For example:
Profitability is a measure of performance (1) and can be used to show the

bank so that it may give the business a loan for expansion. (1) It shows how
efficiently the business is converting investment into profit (1) as shown by the
percentage of profit to revenue or profit to investment in the business. (1)

PUBLISHED 2020
3(b) Consider the advantages and disadvantages of the following three sales 12
promotion methods Gemma could use for the new shop. Recommend
which method Gemma should choose to maximise revenue. Justify your
answer.
• Buy one, get 50% off second purchase
• 10% off everything in the shop for one week after opening
• Pay a celebrity to open the shop

Detailed discussion of the two or more methods of sales

promotion.
Well-justified recommendation.
Candidates discussing all three methods in detail, in

context and with well-justified recommendation including
why the alternative methods were rejected should be
rewarded with the top marks in the band.

Detailed discussion of at least one method.

choice made.
Candidates discussing two or more methods in detail and

marks in the band.

Limited ability to discuss the methods with little/no

explanation.

Candidates outlining all three methods in context should


PUBLISHED 2020
Buy one get 50% • Encourages customers to buy more jewellery -

off second more sales to gain the second item at 50%
purchase reduction
• But this will reduce the gross profit on the second
item of jewellery – lower profit overall
• Customers may perceive this as lower quality
jewellery
10% off • Encourages sales on all items of jewellery as

everything in the reduction on all items
shop for one • Less effect on gross profit than the 50% off (which
week after will effectively be 25% reduction on each item)
opening • However, slightly less gross profit on each item but
this will also mean less gross profit paid to the
franchisor
Pay a celebrity to • Many people may visit the shop to meet the
open the shop celebrity – increasing sales while people are in the
shop
• Gains full gross profit on each item as opposed to
the two alternative options
• If customers like the jewellery then may visit the
shop again later and sales may continue to
increase
• Increased cost of paying the celebrity to visit the
shop which can be very expensive
• Improved the image of the shop – as the shop may
be associated with the celebrity and the luxury
nature of GJs jewellery

PUBLISHED 2020
3(b)
Recommendation Justification might include:
• Revenue is likely to increase in all three options.
However, buy one get 50% off second purchase of
jewellery will attract customers to the make more
than one purchase leading to the highest increase
in revenue. The second option may only gain a
small increase in revenue because a 10%
reduction in price is a small discount and may not
encourage much more than a 10% increase in
sales. Although the celebrity may attract
customers to the shop it is a one day promotion
and will only increase sales and revenue for one
day.
• A price reduction of 10% may be the most effective
in maximising revenue by encouraging increased
sales of all items of jewellery. The loss in revenue
from the price reduction of 10% could then be
more than compensated for assuming a higher
than 10% increase in the number of jewellery
sales.
• Paying a celebrity may increase revenue the most
because many people will be made aware of the
shop and be attracted to its opening. Many of
these people may then make purchases of
jewellery when at the new shop which would not
otherwise have been made, therefore increasing
revenue by the highest amount.

PUBLISHED 2020
4(a) Explain the effect of the following changes on GJ. 8

• Depreciation in the exchange rate of country Z
• Increase in income tax in country Z
Award 1 mark for each relevant effect (maximum of two):
Relevant effects might include:
Depreciation in the exchange rate of country Z:

• This means the value of the currency falls - higher cost of imported
goods/higher cost of supplies of imported jewellery – possibly decreased
profit
• GJ may need to increase prices which may discourage sales
• If GJ export jewellery using their app – export prices are lower after
depreciation so easier to sell abroad – more overseas customers
Increase in income tax in country Z:

• This decreases consumer disposable income and decreases demand for
luxuries which may decrease revenue for GJ
• Employees may ask for a wage increase due to lower disposable income
Award a maximum of 3 additional marks for each explanation – one of which

must be applied to this context.
For example:
Depreciation in the exchange rate will result in import prices rising. (1) This
will increase the cost of jewellery to GJ (app) which will lead to either higher
prices and lower sales (1) or lower gross profit being made if she keeps prices
the same. (1)
Application could include: Gemma has developed a website, customers can

download an app to order jewellery.
Note: Gemma sells expensive items of jewellery, rings and bracelets may be
considered to be luxury goods.

PUBLISHED 2020
4(b) Consider how the following three changes might affect GJ. Which 12
change is likely to have the most effect on GJ’s profit? Justify your
answer.
• All jewellery packaging must state in which country the product has
been made
• Country Z has entered a boom phase of the business cycle
• A higher percentage of people in country Z use mobile (cell) phones

Detailed discussion of two or more changes.
Well-justified conclusion.
Candidates discussing all three changes in detail, in

context and with well-justified conclusion, including why
the alternative changes were rejected, should be rewarded
with the top marks in the band.

Detailed discussion of at least one change.

choice made.
Candidates discussing two or more changes in detail and

marks in the band.

Limited ability to discuss the changes with little/no

explanation.

Candidates outlining all three changes in context should


PUBLISHED 2020
4(b) Relevant reasons might include:
All jewellery • May improve reputation as GJ jewellery supplied by

packaging the Beautywise franchise is ethically sourced
must state in when it is imported
which country • Customers may not bother about which countries
the product jewellery has come from and only be concerned with
has been style and price
made
Country Z has • Increased consumer incomes may lead to higher

entered a sales of jewellery as it is a luxury good
boom phase of • GJ may take the opportunity to raise prices
the business • May buy jewellery from GJ as it is higher quality
cycle jewellery and now consumers can afford to buy from
GJ therefore increasing sales
• However, there may be other products consumers
want to purchase first – jewellery may be bought at
certain times such as weddings or birthdays and this
may not be affected by higher incomes
A higher • More people will find it easier to check GJ website to

percentage of see what jewellery it has for sale – easier to compare
people in with competitors – may increase or decrease sales
country Z use depending on how GJ compares with competitors
mobile (cell) • GJ may start to advertise using social media
phones • May be able to expand sales to other countries
• Overseas sales may result in added delivery costs
• May have little effect on GJ if consumers still prefer to
go into the shop to see and try on jewellery before
buying

PUBLISHED 2020
4(b)
Conclusion Justification might include:
• The changes to packaging may have the most effect
if consumers are concerned about ethical issues and
even if they have a higher income from the boom,
they will not purchase jewellery from shops that do
not sell ethically sourced inventory so GJ should
have increased profit.
• Economic boom is likely to have the biggest effect on
profit as consumers will have higher incomes and be
more likely to spend some of this on expensive
jewellery rather than cheaper jewellery and therefore
GJ will have higher revenue and higher profit even
after payments to the franchisor. If only some
consumers are concerned about ethical issues this
change will have less effect on sales and profit.
• More mobile (cell) phones will allow GJ to increase
the target customers for sales from beyond where the
shop is located as they have their own mobile
phone app. The potential increase in the number of
customers and therefore sales may be greater than
the increase in disposable income of local residents
near to the shops. Therefore, this may provide the
greater increase in revenue and possibly profit as
costs of selling on the internet are also lower.

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Cambridge O Level

BUSINESS STUDIES 7115/21

This document consists of 16 printed pages.

© UCLES 2020 [Turn over

Generic Marking Principles

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

GENERIC MARKING PRINCIPLE 2:

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

GENERIC MARKING PRINCIPLE 4:

GENERIC MARKING PRINCIPLE 5:

GENERIC MARKING PRINCIPLE 6:

© UCLES 2020 Page 2 of 16

Question Answer Marks

1(a) Explain two reasons why having business objectives is important to 8

Award 1 mark for each relevant reason (maximum of two):

Relevant reasons might include:

Award a maximum of 3 additional marks for each explanation – one of which

© UCLES 2020 Page 3 of 16

Question Answer Marks

1(b) Consider the advantages and disadvantages of buying the Beautywise 12

Level Description Marks

3 Sound application of knowledge and understanding of 9–12

Detailed discussion of both the advantages and

Candidates discussing advantages and disadvantages in

2 Sound application of knowledge and understanding of 5–8

Detailed discussion of at least one advantage or

Judgement with some justification/some evaluation of

Candidates discussing the advantages and disadvantages

1 Limited application of knowledge and understanding of 1–4

Limited ability to discuss the advantages and

Simple judgement with limited justification/limited

Candidates outlining advantages and disadvantages of

© UCLES 2020 Page 4 of 16

Question Answer Marks

1(b) Relevant points might include:

• It is a known jewellery • High cost of $50 000 per

Conclusion Justification might include:

© UCLES 2020 Page 5 of 16

Question Answer Marks

Job specification for the shop manager

Award 1 mark for each relevant requirement (maximum of four):

Relevant requirements might include:

Award a maximum of 1 additional mark for each explanation which must be

© UCLES 2020 Page 6 of 16

Question Answer Marks

Level Description Marks

3 Sound application of knowledge and understanding of 9–12

Detailed discussion of two or more locations.

Candidates discussing the three locations in detail, in

2 Sound application of knowledge and understanding of 5–8

Detailed discussion of at least one location.

Judgement with some justification/some evaluation of

Candidates discussing two or more locations in detail and

1 Limited application of knowledge and understanding of 1–4

Limited ability to discuss the locations with little/no

Simple judgement with limited justification/limited

Candidates outlining the three locations in context should