Cambridge IGCSE™

BUSINESS STUDIES 0450/22

Paper 2 Case Study February/March 2021
MARK SCHEME

IMPORTANT NOTICE

Mark Schemes have been issued on the basis of one copy per Assistant examiner and two copies per Team
Leader.

STM version

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This document consists of 19 printed pages.

 03_0450_22_2021_1.8
© UCLES 2021

 Cambridge Assessment International Education – 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.
GENERIC MARKING PRINCIPLE 2:

Marks awarded are always whole marks (not half marks, or other fractions).
GENERIC MARKING PRINCIPLE 3:

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.
GENERIC MARKING PRINCIPLE 4:

Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
GENERIC MARKING PRINCIPLE 5:

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).
GENERIC MARKING PRINCIPLE 6:

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.

Page 3 of 16

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

1(a) Explain two advantages and two disadvantages of being a 8

sole trader.
One mark for each advantage/disadvantage (maximum of two
advantages/two disadvantages).
Award a maximum of one additional mark for each explanation of
the advantage/disadvantage of being a sole trader.

Advantages could include:

• Few legal regulations to follow when setting up/easy to set up
and close
• The owner is their own boss/make own decisions/be in total
control
• Freedom for the owner to choose their own hours of work/
holidays etc.
• Owner has close contact with customers
• Owner keeps all the profit
• Accounting information can be kept private

Disadvantages could include:

• No one to discuss business decisions with - lack of ideas
• Unlimited liability
• Limited sources of finance
• May have to remain small because of limited capital/lack of
economies of scale/there are limited opportunities for
promotion the business may lose talented staff to larger
businesses
• If owner cannot work there is no one to run the business in their
absence
• No separate legal identity - no continuity if owner retires/dies
• Owner may not have knowledge/expertise in all areas of
running the business
• No one to share risks/losses with

For example: There is unlimited liability (1) that means the owner’s
personal possessions are at risk of being taken to pay any debts of
the business. (1)

1(b) Consider the two orders for ST products in Appendix 2. Which 12

order should ST accept? Justify your answer using relevant
calculations.

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Level Description Marks

3 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of both orders.

Well-justified conclusion.
Candidates discussing both orders in detail, in context
and with well-justified conclusion including why the
alternative order was rejected should be rewarded with
the top marks in the band.

9-12

2 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of at least one order.
Judgement with some justification/some evaluation of choices
made.
Candidates discussing both orders in detail and applying
them to the case should be rewarded with the top marks
in the band.

5-8

1 Limited application of knowledge and understanding of

relevant business concepts.
Limited ability to discuss the orders with little/no explanation.
Simple judgement with limited justification/limited evaluation of
choices made.
Candidates outlining both orders in context should be rewarded
with the top marks in the band.

1-4
0 No creditable response. 0

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Relevant points might include
Option A Option B
Revenue $100 000 (L1) $50 000 (L1)
Cost of sales $50 000 (L1) $20 000 (L1)
Gross profit $50 000 (L2) $30 000 (L2)
GPM 50% (L2) 60% (L2)
Additional expenses $25 000 (App) $10 000 (App)
Total cost $75 000 (L1) $30 000 (L1)
Profit $25 000 (L2) $20 000 (L2)
PM 25% (L2) 40% (L2)

• Order A The revenue is much higher

• Gross profit is higher by $20 000
• Profit is higher by $5000
• However, GPM is lower at 50%
• PM is lower at 25%
• The customer made low number of orders - 3 times last year
– may be a relatively new customer
• Total profit from the 3 orders is $75 000

• Order B Quantity ordered may be much lower as price is

higher
• Although gross profit is lower, the GPM is higher at 60%
• Profit is lower but the PM is higher at 40%
• This is a regular customer and ordered 10 times last
year and ST will not want to disappoint them
• Total profit from the 10 orders is $200 000
Conclusion To access L3 there must be either correct profit or
profit margins calculated for each Order.
• On just the amount of profit made I would recommend choosing
Order A as both gross profit and profit are higher than Order B
and the quantity ordered is higher at 5000 for each order.
This will enable ST to increase the amount of profit made.
However, Order A is not made very often at only 3 times last
year and so overall the amount of profit made over the year
may be less for this Option A and so Option B might be better.
• On the gross and profit margins then Option B is better than
Option A. Both margins are higher for Option B and therefore
this has the higher profitability. This Option also has a higher
number of orders over the year as each order is 1000
products and was ordered 10 times last year and so this
Option is the better one to choose.

0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

2(a) Explain two ways Saanvi can increase the added value of ST 8
products.
One mark for each way (maximum of 2)
Award a maximum of 3 additional marks for each explanation of how
added value can be increased – one of which must be applied to
this context.
Relevant answers might include:
Increase price (1) – explanation of why/how prices can be
increased (1) such as:
• improve quality of the T-shirts

• improve reputation for high quality logos on the products

• establish brand image

• improve product features such as excellent customer

service/USP

Reduce input/raw material costs (1) explanation of how these

can be reduced (1) such as:
• buy cheaper raw materials/find cheaper suppliers of T-shirts
• lower the quality of inputs such as cheaper fabric
• reduce the amount of inputs needed, for example redesign the
T-shirts so they do not use as much fabric
For example: Reduce raw material costs (1) such as buy cheaper
fabric/material (app). ST could change to a cheaper supplier of raw
materials (1). This will increase the gap between price and input
costs and therefore increase added value (1).
Application could include: t-shirts; customers’ own designs; no
other company offers guarantee of 100% satisfaction; high priced
products aimed at niche markets; digital sewing machines; logo
name or picture provided by customer
NB: The two ways can both come from either increased price or
reduce input costs or one from each.

2(b) To expand the business in the future ST need to decide whether 12

to change from niche marketing to mass marketing. Consider
the advantages of both methods. Which method should ST
use? Justify your answer.

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Level Description Marks

3 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of niche and mass marketing.

Well-justified recommendation.
Candidates discussing both types of marketing in detail,
in context and with well-justified recommendation
including why the alternative market was rejected should
be rewarded with the top marks in the band.

9-12

2 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of at least one type of marketing.

Judgement with some justification/some evaluation of choices

made.
Candidates discussing both types of marketing in detail
and applying them to the case should be rewarded with
the top marks in the band.

5-8

1 Limited application of knowledge and understanding of

relevant business concepts.
Limited ability to discuss niche and mass marketing with little/no
explanation.

Simple judgement with limited justification/limited evaluation

of choices made.
Candidates outlining niche and mass marketing in context
should be rewarded with the top marks in the band.

1-4
0 No creditable response. 0

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Relevant points might include:

• Niche marketing ST T-shirts are a better match to customer

needs whereas competitors’ products may be aimed at mass
markets
• Appeals to a specific type of customer wanting their own
designs/brand loyalty
• May be able to charge a higher price
• Higher profit margin/higher price
• Build market expertise in their specialist field
• Marketing well targeted and more cost effective

• Mass marketing Mass marketing usually has a large number of

potential customers
• Targets a wide market – greater opportunities for
increased sales
• Standardised T-shirts can be mass produced
• Lower unit costs for standardised product
• Prices may be lower as unit costs lower – increased demand
– higher profit
• Recommendation Stay with niche marketing as ST
already has a good reputation for high-quality products and
has many loyal customers. If ST went into mass marketing,
there are many competitors and it might be more difficult to
expand sales. New products and operations would also be
required to expand into a mass market, and this may be
expensive and difficult to finance.
• Mass marketing could also be justified because it will be a
larger market with more opportunities for sales of
standardised T-shirts and higher revenue. This may be high
enough to cover the higher capital costs of setting up
production of standardised T-shirts.

3(a) Explain two benefits to ST of having well-motivated 8

employees.

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

One mark for each benefit (maximum of 2)
Award a maximum of 3 additional marks for each benefit of
having well-motivated employees – one of which must be
applied to this context.

Relevant answers might include:

• Increases labour productivity/higher output per worker –
increases number of products produced – possibly increases
revenue
• May reduce unit costs
• Reduced/low labour absenteeism
• Reduced labour turnover – reduces recruitment costs
• Improved reputation so easier to recruit workers
• More willing to accept changes/new methods of working
• Improved quality of products if more pride in their work – help
reduce waste/better or maintained reputation – lower costs/
increases sales
For example: May reduce labour absenteeism (1) as employees
will be happy in their work and will not take time off unless
absolutely necessary (1) therefore, employees will produce more
T-shirts and ST’s output will increase (app). This should help
ensure that ST can satisfy demand and increase sales (1).

Application could include: t-shirts; customers’ own designs; no

other company offers guarantee of 100% satisfaction; high priced
products aimed at niche markets; digital sewing machines;
produced using batch production; plans for expansion

3(b) ST need to recruit a new Operations Manager. Consider the 12

advantages and disadvantages of the three applicants in
Appendix 3. Which of the applicants should ST employ?
Justify your answer.

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Level Description Marks

3 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of two or more applicants

Well-justified recommendation.
Candidates discussing all three applicants in detail, in
context and with well-justified recommendation including
why the alternative applicants are rejected should be
rewarded with the top marks in the band.

9-12

2 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of at least one applicant.
Judgement with some justification/some evaluation of choices made.
Candidates discussing two or more applicants in detail
and applying it to the case should be rewarded with the
top marks in the band.

5-8

1 Limited application of knowledge and understanding of

relevant business concepts.
Limited ability to discuss applicants with little/no explanation.
Simple judgement with limited justification/limited evaluation of
choices made.
Candidates outlining three applicants in context should be
rewarded with the top marks in the band.

1-4
0 No creditable response. 0

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Relevant points might include:
Advantages Disadvantages

• Aarav Well qualified in management as has a degree

which should make him more equipped to manage the
department
Has the skills to manage people in the Operations
department

• Lacks experience as worked for only 1 year and not as an

Operations Manager only the assistant
• Skilled at designing T-shirts and can use the computer
programs to do this May be set in his ways as only
worked for one business for 20 year – may not adapt easily
to the culture of a different business

• Vivaan Is very experienced as he has worked for 20 years

for one clothing manufacturer
• Loyal employee as he has worked for the same business for
20 years Lacks experience of working for several textile
businesses which may mean a lack of new ideas

• Sai He has a wide range of experience as he has worked

for three different clothing businesses – suggests he is a
talented employee
He is able to repair digital sewing machines – so can save
ST the cost of repair – but he should be focusing on
managing the Operations department and not repairing
machinery
• Does not have a degree so may lack knowledge of how to
run a department
• Lacks experience of management of a department as he has
only been a Supervisor and an Assistant Manager

Recommendation
• Vivaan should be chosen as he has the most experience
and this may help to increase output and improve efficiency
for ST. Aarav lacks experience even though he is well
qualified in management and Sai has not been an
Operations Manager only an Assistant so also lacks the
relevant experience when compared to Vivaan.

0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

4(a) Explain four reasons why high quality is important to ST. 8

Award one mark for reason (maximum of 4).
Award a maximum of 1 additional mark for each explanation in the
context of ST of the reason of why quality is important.

Relevant answers might include:

• Establishes a brand image - for its T-shirts
• Builds brand loyalty - for the own-designed products
• Maintains a good reputation for its products/avoids a bad
reputation being communicated to potential customers –
ensures 100% guarantee of satisfaction for customers as
stated in the advert
• Increases sales of ST products
• Attracts new customers to buy the products
• Decreased costs from not replacing faulty products/reduces
waste - as guarantee 100% satisfaction
• May lead to increased market share/improved
competitiveness
• Allows ST to charge a higher price
For example: Avoids a bad reputation being communicated to
potential customers (1) so ST can maintain its excellent brand
image for high quality T-shirts (app).

Application could include: t-shirts; customers’ own designs; no

other company offers guarantee of 100% satisfaction; high priced
products aimed at niche markets; digital sewing machines; plans
for expansion; business has grown quickly; producing designs
with a logo or pictures.

4(b) Consider how the following two changes might affect ST. 12
Which change is likely to have the most effect on ST’s
revenue? Justify your answer.

• The business cycle in country Z moves into a slump

• The government of country Z focuses on reducing
unemployment

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Level Description Marks

3 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of both changes.

Well-justified conclusion.
Candidates discussing both changes in detail, in context
and with well-justified conclusion including why the
alternative change is rejected should be rewarded with the
top marks in the band.

9-12

2 Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.
Detailed discussion of at least one change.
Judgement with some justification/some evaluation of choices
made.
Candidates discussing both changes in detail and
applying them to the case should be rewarded with the
top marks in the band.

5-8

1 Limited application of knowledge and understanding of

relevant business concepts.
Limited ability to discuss the changes with little/no explanation.
Simple judgement with limited justification/limited evaluation of
choices made.
Candidates outlining both changes in context should be
rewarded with the top marks in the band.

1-4
0 No creditable response. 0

 0450/22 IGCSE - Mark Scheme February/March 2021

Question Answer Marks

Relevant points might include:
• The business cycle in country Z moves into a slump
Unemployment rises
• Economic growth falls into negative
• Demand for many products such as T-shirts will fall
• Prices may fall as demand has fallen
• Many businesses will fail – especially those that sell non-
essential or luxury products such as high-quality T-shirts

• The Government of country Z focuses on reducing

unemployment May increase government spending to boost
spending in the economy
• Reduce tax/ income tax/indirect taxes/profits tax
• Lower interest rates
• All these changes in economic policies are designed to boost
spending in country Z
• If effective, then demand for many products will increase –
may include demand for ST T-shirts
• Businesses will see demand increase and the demand for
specialist T-shirt may increase - leading to increase in
revenue for ST
• Conclusion Moving into a slump is likely to have a bigger
effect on revenue than other changes. Demand will fall
significantly, and many businesses will fail leading to much
lower sales of personalised T-shirts for businesses – even
those businesses that survive will reduce spending on non-
essential marketing such as buying ST products. Whereas
increased government spending or lower taxes will take time to
be effective and to have an effect on business marketing
budgets.
• Government policies aimed at increasing spending could be
argued as having the biggest effect on ST’s revenue and moving
into a slump as having less effect. This is because T-shirts are
not an expensive item and if consumers have increased
incomes from lower direct taxes then sales are likely to increase
significantly. Also, if incomes have increased then the high-
quality T-shirts may be more attractive than standardised
ones leading to sales increasing by a higher amount and
revenue therefore rising by a higher amount.

0450/22 IGCSE - Mark Scheme

Pre-standardisation

© UCLES 2021 03_0450_22_2021_1.8

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