Mocks

Question 1

State two financial methods of motivation.

Answer 1

Profit sharing
Commision

Question 2

Explain one method a business may use to expand.

Answer 2

Franschising will lead to more stores being oponed from franchiees

Question 3

Explain one benefit of job production to a business.

Answer 3

Unique selling point can create usp causing them to charge higher prices for products

Question 4

Explain one benefit to shareholders of limited liability.

Answer 4

Personal assests and possieion are safe as they are not liable for business debts

Question 5

Identify two stages of the process of procurement

Answer 5

Negotating terms of payment
Finding suppliers for best value of money

Question 6

State and explain two employment laws

Answer 6

National minimum wage/living wage (1) is a minimum hourly rate set by the government all employees must receive (1).
Equality Act (1) prevents discrimination for example based on age (1).

Question 7

Explain one reason why the objectives of a business may change over time.

Answer 7

Examples of a developed answer
Objectives may become more ambitious as a business becomes more established (1), for example from making profit to becoming a market leader (1).

Question 8

Recommend whether Jameel should create a business plan before making a decision about accepting the order. Give reasons for your recommendation.

Answer 8

Jameel would benefit from a business plan because they often
analyse the market. He will be able to complete market research to estimate the demand for the toy sets. As they are unusual designs he will be able to find out what types may be more popular as so far, he has only sold to family and friends who don’t represent most customers. This will help him to produce the right quality of different types of toys for the shop avoiding too many left unsold. This will make sure that he is able to manage his resources more effectively, such as cash, particularly as he is not getting paid by the shop until December.
Jameel does not have much time to write a business plan and if production needs to start immediately he may find that he is unable to produce the 100 toys needed. As he has some knowledge of the market by producing toys for family and friends, he should be able to estimate the types of toys which will be more popular. The toy shop may place more orders in the future so it is important that Jameel makes the toys to the best quality and meets the delivery time. However, the toys are time consuming to make therefore if he only has three months to produce a large order it does not allow much slack if anything goes wrong.
Evaluation/Conclusion
• Although Jameel has no experience of running a business he will be aware of the importance of business planning from his time at college and how much it can help direct his business and is more important than this one order.
• The decision may depend on other potential customers and how much market research is needed to understand the needs of the market.

Question 9

Explain one way in which health and safety law might decrease the profits of a
business

Answer 9

Profits will decrease as costs increase due to having to train staff for example health and saftey laws stare they must be trained on new equipment

Question 10

Jameel will manage all the employees himself.
Analyse one drawback of a flat organisational structure for JAA Toys.

Answer 10

Example of a Level 3 developed answer
A flat structure will be a drawback for JAA Toys because it will be difficult for Jameel to supervise all the employees. When Jameel is visiting toys shops in the North of England he will not be in the workshop keeping control over the production of the toys. Therefore, he will not be able to check that unique toy designs are being followed. Employees may have to make some decisions without checking with Jameel and this may mean the quality of the production of the toys may not be to Jameel’s standard and may need to be thrown away

Question 11

It is difficult for Jameel to predict demand and there are times when he has few orders.
Recommend whether Jameel should use zero-hour contracts for the new employees.
Give reasons for your recommendation.

Answer 11

Zero hour contracts will give jameel flexibilty to reduce his work force e when demand changes. For example, when production is low as there are few orders he would not need to give staff many hours that week. This means that the cost of wages can be tightly controlled and help him control his rising costs. However, when the business is busy employees can be given lots of hours to ensure that these orders are met. Thus making sure that the business does not disappoint toy shops when they need their orders.
JAA Toys needs a skilled workforce to make unique toys. This means that recruitment and retention of skilled staff is important. Zero-hour contracts may not motivate the staff or attract skilled staff to apply for the job and he may have to employ unskilled staff. As the unique design is important for the USP this may mean staff are not able to replicate his designs and Jameel will not be able to sell the toys. Mistakes during production may prove costlier as he will have to employ staff for more hours to correct them and won’t help him control his rising costs.
Jameel could use the incentive of a higher hourly rate of pay.
• Jameel may recruit low skilled employees with zero hour contracts but train them himself to upskill
them.
• Zero-hour contracts are a risk if unique design of toys are a selling point, the skilled workforce is the
most important element to this business.
• Depends on the local labour market and if skilled staff are available.
• The cost of wages should not be too high because JAA Toys only has a small number of workers and
none are paid management rates.

Question 12

Using Item C, explain one benefit to Eve of being a sole trader.

Answer 12

A sole trader does not have to share profits as they are the only owner of the business. Eve’s business has been very successful and the profit is the reward she receives for investing her £5000 life savings. She can keep the large profit of £450 000 for herself or choose to reinvest some profit in the business.

Question 13

Using the data in Table 1, explain one way in which competition affects STC.

Answer 13

Examples of a Level 2 developed answer
The fast fashion market competes on price as the average selling price of clothing is falling. This would suggest that the business has to reduce prices to attract and keep its customers. If STC reduces prices it can give them an advantage over rivals. This often happens as competition increases which is shown by the 100% increase in the number of direct competitors in the market within two years.

Question 14

Analyse one effect of Eve’s style of management on staff motivation.

Answer 14

Example of a Level 3 developed answer
A manager who retains authority doesn’t allow staff to have a say and this can demotivate employees which can lead to higher staff turnover. As Eve makes all the major decisions in the business this does not allow staff to have some freedom and develop themselves. This may mean that there is no opportunity for the staff to be more fulfilled in their role and this could be why the buying team are leaving the business as it can lead to less loyalty to the business. The long-term effect is that staff recruitment will be harder as the business will have a reputation for not allowing employees a say.

Question 15

data from Table 2, describe how the information indicates STC has experienced growth.

Answer 15

Units cost have fallen by£20
Sales uncrease by £50,000

Question 16

Using Table 2, explain one benefit to STC of its growth.

Answer 16

One benefit is economies of scale. As the business grows, they are able to buy their materials in greater quantities which means that they have a lower price per unit (1).

Question 17

STC currently uses six suppliers. The amount paid to them is shown in Table 3.
Analyse one benefit to STC of effective supply chain management.

Answer 17

Example of a Level 3 developed answer
An effective supply chain can ensure the success of the business in a competitive market. If suppliers can produce on time then this will ensure stock is available when needed. Collections only last for four weeks and therefore a delay in the delivery could mean that they go out of fashion quickly and the business may be left with unsold clothing. The efficiency of the suppliers in producing the collection, which can be 30 items, within one month could affect the competitiveness of the business when there is more competition in the market.

Question 18

STC wants to increase customer loyalty and is considering two options to achieve this.
1. Introduce live chat to the website to improve customer service.
2. Introduce a recycling scheme to improve the ethical behaviour of the business.
Analyse the effect of each of these two options on STC.
Evaluate which of these two options will have the biggest impact on customer
loyalty for STC.

Answer 18

This should lead to a higher number of items being purchased and an overall more satisfactory shopping experience. However, this increase in sales would need to be significant to cover the cost of employing two people and it may not be enough to satisfy customers’ expectations. If the products fit better then customers are less likely to return the clothing and will consider returning for another purchase in the future. If an exchange or refund is needed then the live chat will make the process more efficient and improve customer satisfaction. This can be an important part of customer service and should encourage customers to be more loyal to the business.
Although it will cost the business money for the postage of products under the scheme it can generate positive publicity for the business and encourage customers to return and purchase more products. As the products they buy are fast fashion and due to trends are not expected to be worn for a long time, customers can be confident that they are reducing their impact on the environment by returning the clothing for recycling. As this is available for repeat purchases and gives a discount off another purchase it will help solve the issues that customers are not returning frequently.
Could the recycling scheme cost more than the extra sales it generates? However it may depend if it
can charge higher prices.
• If it doesn’t introduce the recycling scheme this could cause a downward trend in sales as fast fashion
is impacted on due to the greater concern for the environment.
• It depends on how skilled the live chat agents will be at giving sizing advice, this will be limited without
trying the products on and high returns are still likely for clothing.
• Customer expectation of when the live chat is available may mean the business can’t meet its
promises and cause a more negative impact on the business.
• It may need to do further research into the fit of clothing to be able to offer the live chat service. It could be design faults and not sizing guides causing the problem.