Cambridge International Examinations

Cambridge International General Certificate of Secondary Education

*2294897964*

BUSINESS STUDIES 0450/12

Paper 1 October/November 2016
1 hour 30 minutes

Candidates answer on the Question Paper.

No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.

Answer all questions.

The businesses described in this question paper are entirely fictitious.

At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.

The syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.

This document consists of 10 printed pages and 2 blank pages.

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1 APQ is a multinational company. It makes chemicals that are sold to farmers which help increase
the amount of food produced. It plans to open a factory in country X, a developing country with low
interest rates. The Finance Director said: ‘This factory will create many external benefits. APQ is
a public limited company which tries to act in an ethical way with all its stakeholder groups.' The
new factory will cost $100m and there will be an opportunity cost for APQ. The Finance Director
cannot decide which source of finance to use for the new factory.

(a) What is meant by ‘opportunity cost’?

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(b) Identify two possible external benefits that might result from the new factory.

Benefit 1:...........................................................................................................................

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Benefit 2:...........................................................................................................................

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(c) Identify and explain two advantages to APQ of being a multinational company.

Advantage 1:.....................................................................................................................

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Explanation:.......................................................................................................................

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Advantage 2:.....................................................................................................................

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Explanation:.......................................................................................................................

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(d) Identify two stakeholder groups of APQ. Explain how APQ could act in an ethical way with
each stakeholder group.

Stakeholder group 1:.........................................................................................................

Explanation:.......................................................................................................................

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Stakeholder group 2:.........................................................................................................

Explanation:.......................................................................................................................

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(e) Explain two suitable sources of finance that APQ could use for the new factory. Recommend
which source of finance APQ should use. Justify your answer.

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2 $LAND sells a wide range of products from food to toys. It has 400 shops in country B. $LAND's
marketing strategy is based on penetration pricing. $LAND does no advertising and buys all its
products directly from manufacturers. Revenue and profit have increased despite the country being
in recession. The Marketing Director wants to expand the business by opening shops in other
countries. He believes $LAND will be successful in other countries.

(a) What is meant by ‘marketing strategy’?

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(b) What is meant by ‘penetration pricing’?

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(c) Identify and explain two possible advantages to $LAND of advertising.

Advantage 1:.....................................................................................................................

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Explanation:.......................................................................................................................

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Advantage 2:.....................................................................................................................

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Explanation:.......................................................................................................................

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(d) Identify and explain one advantage and one disadvantage to $LAND of buying direct from
manufacturers.

Advantage:........................................................................................................................

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Explanation:.......................................................................................................................

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Disadvantage:....................................................................................................................

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Explanation:.......................................................................................................................

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(e) Do you think that $LAND will be successful in other countries? Justify your answer.

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3 TKF makes furniture such as beds and tables using job production. TKF has 3 part-time office
employees, 8 production workers and 1 manager who is expected to carry out quality control. As
the factory is busy, most communication is by email. After a number of customer complaints, the
manager thinks TKF has some communication barriers. He believes good internal communication
can help TKF be more efficient. The manager is also worried about TKF’s cash flow position.

Table 1: Cash flow forecast for TKF ($000)

December January February

Cash in 35 20 29

Cash out 29 25 26

Net cash flow 6 (5) 3

Opening balance (3) 3 (2)

Closing balance 3 (2) 1

Figures in brackets are negative.

(a) What is meant by ‘job production’?

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(b) What is meant by ‘quality control’?

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(c) Identify and explain two possible communication barriers for TKF.

Barrier 1:............................................................................................................................

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Explanation:.......................................................................................................................

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Barrier 2:............................................................................................................................

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(d) Identify and explain two ways in which good internal communication can help TKF be more
efficient.

Way 1:................................................................................................................................

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Explanation:.......................................................................................................................

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Way 2:................................................................................................................................

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Explanation:.......................................................................................................................

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(e) Do you think the manager is right to be worried about TKF’s cash flow position? Justify your
answer.

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4 Moeen and Ali plan to start up a small luxury hotel in the centre of a city in country R. They have
a budget of $30 000 to pay for all costs. After researching different types of business organisation,
as shown in Table 2, Moeen thinks the hotel should be a private limited company. If the business
is to be successful, Ali knows choosing the right location will be important. He cannot decide whether
to recruit full-time or part-time employees.

Table 2: Private sector business organisations in country R (millions)

Sole trader 3.0

Partnership 0.5
Private limited company 1.2
Other types of business organisation 0.3

(a) Identify two ways to measure the size of a business.

Way 1:................................................................................................................................

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Way 2:................................................................................................................................

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(b) Calculate the percentage (%) of businesses in country R which are partnerships.

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(c) Identify and explain two advantages to Moeen and Ali of forming a private limited company.

Advantage 1:.....................................................................................................................

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Explanation:.......................................................................................................................

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Advantage 2:.....................................................................................................................

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(d) Identify and explain two factors that might influence Ali’s choice of location for the business.

Factor 1:............................................................................................................................

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Explanation:.......................................................................................................................

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Factor 2:............................................................................................................................

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(e) Do you think it would be better for the business to use full-time or part-time employees? Justify
your answer.

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