Cambridge International Examinations

Cambridge International General Certificate of Secondary Education

*1910087841*

BUSINESS STUDIES 0450/21

Paper 2 October/November 2018
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 Insert contains the case study.
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.

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

This document consists of 9 printed pages and 3 blank pages.

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1 (a) Identify and explain two advantages and two disadvantages of GT being a public limited
company.

They have a permanent source of finance which are shareholders

Advantage 1: ....................................................................................................................
and very large sums of capital can be raised when they are in need as there is
...........................................................................................................................................
no limit to the number of shareholders.
Explanation: ......................................................................................................................

...........................................................................................................................................
Being a public limited company offers separate legal identity so as
Advantage 2: ....................................................................................................................
the business has fallen from the past 12 months and if it fails completely,
...........................................................................................................................................
shareholders personal assets wont be seized.
Explanation: ......................................................................................................................

...........................................................................................................................................
Shareholders are important to public limited comany and
Disadvantage 1: ................................................................................................................
many more regulations and contols had to be followed which are made by the
...........................................................................................................................................
shareholder, in oreder to keep the shareholders happy and
Explanation: ......................................................................................................................
convincing them to keep investing.
...........................................................................................................................................
All accounts of the business had to be shared, and as GT's
Disadvantage 2: ................................................................................................................
slaes have fallen over the past 12 months, this could create a poor brand image
...........................................................................................................................................
for the comapny in the market.
Explanation: ......................................................................................................................

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(b) Consider the advantages and disadvantages of the following two options for distributing GT
products. Recommend the option GT should choose. Justify your answer.

By continuing selling to large shops GT can

Continue selling to large shops: .......................................................................................
increase the chances of their toys getting sold to many customers which may
...........................................................................................................................................
incraese their sales and hence receive a higher revenue. However, large shops
...........................................................................................................................................
may demand economies of scale as they would be buying in bulk and giving
...........................................................................................................................................
them the toys on discount will make it difficult for them to cover their cost of
...........................................................................................................................................
production.
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
If GT decides to choose e-commerce then
Only sell its products using e-commerce: .........................................................................
their orders can be taken over the internet and sent directly to the custumers
...........................................................................................................................................
from the company's warehouse, this would prevent any communication barriers.
...........................................................................................................................................
However, transport costs for GT will be very high as it sells the toys throughout
...........................................................................................................................................
country Y and in other countries as well. This will likely reduce GT's profit margin
...........................................................................................................................................
on every toy sold.
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
I think GT should sell their toys only on e-commerce as
Recommendation: ............................................................................................................
parents of the kids for which the toys are might be working and wont have the time
...........................................................................................................................................
to visit a shop to buy toys. This can help them in shopping at their feasible time
...........................................................................................................................................
and not waste time of travelling to the shop. Whereas, those larger shops that
...........................................................................................................................................
GT sells its toys may not be in every area of country Y, hence making it difficult
...........................................................................................................................................
for customer to buy the product even if he is willing to. This can cause a reduction
...........................................................................................................................................
in sales as customer might switch to competitor if he is getting their product
...........................................................................................................................................
more easily.
........................................................................................................................................... [12]

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2 (a) Identify and explain two roles of the Operations manager at GT.

Role 1: ..............................................................................................................................

...........................................................................................................................................

Explanation 1: ...................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Role 2: ..............................................................................................................................

...........................................................................................................................................

Explanation 2: ...................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

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(b) Consider the following three ways GT can reduce the average cost of products. Recommend
the best way to choose. Justify your answer.

This can help them cut down costs

Change to a cheaper supplier of raw materials: ...............................................................
and increase their profit margins without having to increases prices like they did
...........................................................................................................................................
last year. However, the quality of toys may get deteriorated which may not be
...........................................................................................................................................

liked by the parents of the young children GT makes toys for, as babies tend to
...........................................................................................................................................
chew toys and chewing something which may harm the health of their kid would
...........................................................................................................................................
not be preferred by parents.
...........................................................................................................................................
Doing this can
Change the design of products so that they need fewer components: ............................
help them spending less on their fixed costs which would help them improve their
...........................................................................................................................................
gross profit. Also, as the toys are for babies, they need new toys very frequently
...........................................................................................................................................

because they easily get bored of the ones they have. If the new designs are not
...........................................................................................................................................
liked by the customers, they wont be willing to buy it which would further reduce
...........................................................................................................................................
sales for GT.
...........................................................................................................................................

Change from batch production to flow production: ...........................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
I think they should choose to change the design of products
Recommendation: ............................................................................................................
as GT sells to various other countries and not just country Y, and people in
...........................................................................................................................................
other countries may have a different liking of the design of the toy that people in
...........................................................................................................................................
country Y. This can help them create more sales as they are able to satisfy more
...........................................................................................................................................
people's wants. Whereas, switching to a cheaper supplier may also spoil the
...........................................................................................................................................
brand image that GT has for 50 years. It would create an impact that the company
...........................................................................................................................................
is running into losses and potential shareholders might not invest in future.
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3 (a) Identify and explain two factors GT should consider when developing products for markets in
different countries.

They should consider the need of the customers in different countries

Factor 1: ...........................................................................................................................
as there might be more of teenage children than kids below school age or
...........................................................................................................................................
babies in those countries. So it would be a fail to produce products
Explanation: ......................................................................................................................
which won't be bought by the people of different countries and may get GT
...........................................................................................................................................

to run into losses.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Competition - Gt may have a competitor in another country which is

Factor 2: ...........................................................................................................................
producing the same types of toys in the country which is different to GT.
...........................................................................................................................................

should analyze and create a UVP so that customers are willing

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

to buy GT's toys rather than their competitors.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

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(b) Consider how the following three communication issues affect GT. Which one of these issues
is likely to cause the biggest problem for GT? Justify your answer.

Different languages are spoken in GT’s markets in other countries: ................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

GT is starting to use several new suppliers: .....................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

GT’s main communication method with its production workers is a weekly meeting: ......

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Conclusion: .......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

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4 (a) Identify and explain one effect on GT and one effect on GT’s employees of workers being
members of a trade union.

Negotiating with workers can be easy as it is being done

Effect on GT: .....................................................................................................................

collectively for everyone which would save a lot of time for the Operations
...........................................................................................................................................

Manager because GT is a huge company and talking to every

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

employee separately wont be possible.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Effect on GT’s employees: They will have more bargaining power towards Gt as, if
...............................................................................................

wages of one production worker is lower than the rest so the other workers will
...........................................................................................................................................
also be reluctant to work. This can help create fairness between
Explanation: ......................................................................................................................

employees which is needed as all the workers are working for the same hours
...........................................................................................................................................

so deserve to be paid the same.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

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(b) Refer to Appendix 3. Consider how the information in Appendix 3 will help the following three
users of accounts. Which user will find the information most helpful when taking decisions?
Justify your answer.

They can get to know if the comapny is making profit from

Shareholders of GT: ..........................................................................................................

the money they have invested in it, $20m. If not, they might be reluctant in
...........................................................................................................................................

giving any further funds to the comany and may even shut down as the money
...........................................................................................................................................
they are investing is not giving them any incentive to invest further.
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

They will use the accounts to help them keep control over the
Managers of GT: ...............................................................................................................

performance of GT which would help them in making important decisions such

...........................................................................................................................................

as, if they should stop exporting to other countries or not. This can help them
...........................................................................................................................................

reduce their cost of sales which is $5M and in fact increase their profit margin
...........................................................................................................................................

from 10%.
...........................................................................................................................................

...........................................................................................................................................

They might need the accounts of GT to compare their

Competitors of GT: ............................................................................................................

businesses' performance from GT's. So they can figure out on what areas they
...........................................................................................................................................

need to work more on so they are more profitable like GT's competitor will have
...........................................................................................................................................

to work more on introducing different designs as GT has introduced 100 more

...........................................................................................................................................

new designs than their competitors.

...........................................................................................................................................

...........................................................................................................................................

I think accounts will be most useful to competitors as they might be

Conclusion: .......................................................................................................................

willing to take over GT's business as now they are more profitable than them and
...........................................................................................................................................

as GT already has an successful existing business, merging the competitors

...........................................................................................................................................

business with GT might increase the profit margins of competitor companies.

...........................................................................................................................................

Whereas, as shareholders are only investing in the company, they may not need
...........................................................................................................................................

the accounts as they don't know the details of the operations that are taking
...........................................................................................................................................
place so might misjudge the decisions taken by managers.
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