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CAMBRIDGE INTERNATIONAL EXAMINATIONS

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International General Certificate of Secondary Education

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BUSINESS STUDIES 0450/01
Paper 1
May/June 2003

1 hour 45 minutes
Candidates answer on the Question Paper.
No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen in the spaces provided on the Question Paper.
Do not use staples, paper clips, highlighters, glue or correction fluid.

Answer all questions.

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 businesses described in this question paper are entirely fictitious.

For Examiner’s Use

1
If you have been given a label, look at the
details. If any details are incorrect or 2
missing, please fill in your correct details
3
in the space given at the top of this page.
4
Stick your personal label here, if
5
provided.
TOTAL

This document consists of 13 printed pages and 3 blank pages.

SP (NF/SLC) S32599/2
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1 (a) When someone sets up their own business for the first time they often decide to operate
as a sole trader.

(i) State and explain two features of a sole trader business.

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(ii) Give three reasons why people may set up their own business.

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(b) The management of a business might set growth as one of the objectives of the
business. Explain why this objective might be set.

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(c) In some countries a number of state owned businesses have been sold to the private
sector (privatisation). State and explain two possible disadvantages to consumers of
this.

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(d) Table 1 gives employment data for country A over the last 10 years.

Table 1

Employment data for country A 1993–2002

1993 2002
% of labour force employed in
Primary Sector 21 14
Secondary Sector 45 40
Tertiary Sector 30 41
Unemployed as % of labour force 4 5
Labour force (millions) 80 84

(i) Calculate the number of people employed in secondary business activities in

2002.

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(ii) Outline two possible reasons to explain the changes in the pattern of employment
between 1993 and 2002 in country A.

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2 Gurinder Singh runs a small business that manufactures office furniture. His best selling
products are office desks and chairs. Sales turnover has risen but profits have stayed
constant. The business is also experiencing cash flow problems.

(a) Explain two reasons why Gurinder’s profit might have stayed the same despite sales
turnover increasing.

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(b) Identify and explain two possible causes of his cash flow problem.

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(c) Gurinder’s accounts show that the business owns both fixed assets and current assets.
Give an example of a:

(i) fixed asset

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(ii) current asset.

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(d) Gurinder helps to finance his business activities by borrowing from a bank. His business
has a secured loan.

What are the disadvantages to a business of using bank loans to finance their
activities?

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(e) The success of a business can be assessed by looking at its final accounts. Explain
how this can be done.

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3 (a) Fig. 1 shows the wage system in company B.

wages
per employee
($)

output per employee

Fig. 1

(i) Describe how the wage system shown in Fig. 1 operates.

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(ii) Is the wage system used by company B a good way of motivating staff? Explain
your answer.

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(b) Company C is finding it difficult to recruit new employees. It pays higher wages than
other companies in the area. Explain two possible reasons why it is finding recruitment
difficult.

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(c) The management of company D believe that they should increase their spending on
staff training.

(i) State and explain two different types of training that could be used by the company.

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(ii) Describe the benefits for company D of having a more highly trained staff.

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4 (a) (i) Draw an organisational chart in the space below that might be appropriate for a
large manufacturing business that operates and sells in many countries.

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(ii) Use your chart to help explain:

(A) span of control

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(B) chain of command.

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(b) Outline two features of an effective communication system in a business.

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(c) State and explain two functions of the management of a business.

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(d) In many countries governments have introduced laws to stop employees being
exploited. Using any examples known to you explain how such laws should help
employees.

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5 (a) A fruit retailer buys his stock from a market wholesaler.

(i) State and explain two factors that the fruit retailer should consider before deciding
the prices to charge his customers.

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(ii) Apart from advertising, suggest a promotion method that the fruit retailer could use
to increase sales. Justify your answer.

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(b) The retailer knows that advertising should help to increase his sales.

(i) Explain why advertising can increase sales.

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(ii) Advertising is not always successful. Explain why.

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(c) Sales of even the most successful products reach maturity. Companies often introduce
extension strategies to prolong the life of such products. Fig. 2 shows the product life
cycle for a computer game.

sales

time

Fig. 2

(i) Show the possible effect of an extension strategy on the product life cycle shown in
Fig. 2. Draw your answer on Fig. 2. [2]
(ii) Explain one possible extension strategy that the computer game manufacturer
could use.

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