Business A Level Paper 1 Topical Past Pa

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137
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Title Topical Business P-1 (Article# 137)

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Contents
UNIT 1 BUSINESS AND ITS ENVIRONMENT ........................................................................... 6

1.1 ENTERPRISE .................................................................................................................................... 16
1.2 BUSINESS STRUCTURE ...................................................................................................................... 26
1.3 SIZE OF BUSINESS ............................................................................................................................ 41
1.4 BUSINESS OBJECTIVES ...................................................................................................................... 47
1.5 STAKEHOLDERS IN A BUSINESS ........................................................................................................... 68
UNIT 2 PEOPLE IN ORGANISATIONS ................................................................................... 78
2.1 MANAGEMENT AND LEADERSHIP ....................................................................................................... 88
2.2 MOTIVATION ................................................................................................................................ 107
2.3 HUMAN RESOURCE MANAGEMENT (HRM) ....................................................................................... 130
UNIT 3 MARKETING ......................................................................................................... 152
3.1 WHAT IS MARKETING ..................................................................................................................... 163
3.2 MARKET RESEARCH........................................................................................................................ 180
3.3 THE MARKETING MIX..................................................................................................................... 195
UNIT 4 OPERATIONS AND PROJECT MANAGEMENT ......................................................... 234
4.1 THE NATURE OF OPERATIONS .......................................................................................................... 240
4.2 OPERATIONS PLANING.................................................................................................................... 247
4.3 INVENTORY MANAGEMENT ............................................................................................................. 268
UNIT 5 FINANCE & ACCOUNTING ..................................................................................... 278
5.1 THE NEED FOR BUSINESS FINANCE ................................................................................................... 287
5.2 SOURCE OF FINANCE...................................................................................................................... 293
5.3 COSTS.......................................................................................................................................... 307
5.4 ACCOUNTING FUNDAMENTALS ........................................................................................................ 317
5.5 FORECASTING & MANAGING CASH FLOWS ........................................................................................ 335
4
BLANK PAGE
Business A-Level P1 Topical 5 U1: Business & Its Environment
Read & Write Publications
Syllabus 2019 –21

UNIT 1
1.1: Enterprise
1.2: Business Structure
Business &
1.3: Size of business
1.4: Business Objectives
Its
1.5: Stakeholders in a business
Environment
A Level
Business
Topical Paper 1
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UNIT 1 Business and its Environment

1.1 Enterprise
1. M/J 19/P12/Q7/a
(a) Analyse the impact of social enterprises on the development of a country. [8]
2. O/N 18/P12/Q4
(a) Define the term ‘value added’. [2]
(b) Briefly explain two ways a restaurant could increase its value added. [3]
3. O/N 18/P11/Q5/a
(a) Analyse the qualities of a successful entrepreneur. [8]
4. M/J 18/P13/Q7
(a) Analyse the potential advantages to a community of a business with ‘triple bottom line’
targets. [8]
(b) Discuss the role of ‘business enterprise’ to the development of a country. [12]
5. MAR 18/P12/Q2
(a) Define the term ‘entrepreneur’. [2]
(b) Briefly explain two qualities of a successful entrepreneur. [3]
6. O/N 17/P12/Q1
(a) Define the term ‘social enterprise’. [2]
(b) Briefly explain two aims of a social enterprise. [3]
7. M/J 17/P12/Q5/a
(a) Analyse problems a business could experience in its first year of trading. [8]
8. M/J 17/P13/Q1
(a) Define the term 'opportunity cost'. [2]
(b) Briefly explain how business decisions involve opportunity cost, using an appropriate
example. [3]
9. O/N 16/P13/Q3
Explain why many new businesses fail within their first year. [5]
10. O/N 16/P13/Q5/a
Analyse the qualities of a successful entrepreneur. [8]
11. M/J 16/P12/Q1
(b) Briefly explain two reasons why new businesses often fail. [3]
12. M/J 15/P12/Q1
(b) Briefly explain two ways in which the objectives of a social enterprise might be similar to
those of other types of business. [3]
13. O/N 14/P12/Q7
(a) Explain the aims of a ‘social enterprise’ organisation. [8]
(b) Discuss the importance of ‘business enterprise’ in your country. [12]
14. O/N 13/P11/Q6

Discuss the differences and similarities between ‘business enterprise’ and ‘social
enterprise’. [20]
15. M/J 13/P13/Q7
(a) Explain the likely conflict between the ‘triple bottom line’ objectives of a social enterprise
operating in your country. [8]
(b) Discuss the role business entrepreneurs could play in the future development of your
country. [12]
16. M/J 12/P11/Q1/a
(a) State two aims of a social enterprise organisation. [2]
17. M/J 11/P13/Q3
Explain why many businesses fail within the first year of trading. [5]
18. M/J 09/P1/Q7
(a) Discuss the problems a new business might experience in its first year of trading. [8]
(b) Explain how market research might be used to reduce some of the problems faced by a
new start-up business. [12]
19. M/J 03/P1/Q1/b
(a) Outline the benefits to a country of successful businesses. [3]
1.2 Business Structure

1. M/J 19/P12/Q7/b
(a) ‘The purchase of an internationally recognised fast food franchise guarantees business
success.’ [12]
2. M/J 19/P11/Q4
(a) Define the term ‘private limited company’. [2]
(b) Briefly explain two possible disadvantages to a sole trader of changing to a private limited
company. [3]
3. O/N 18/P13/Q1
(b) Briefly explain one advantage and one disadvantage to a business of operating as a public
limited company rather than as a private limited company. [3]
4. O/N 18/P13/Q5/a
(a) Analyse the advantages of a ‘partnership’ as a legal structure for the owners of a small
business. [8]
5. M/J 17/P13/Q4/a, M/J 13/P13/Q1/a
(a) Define the term ‘share capital’. [2]
6. MAR 17/P12/Q5/a
(a) Analyse the strengths and weaknesses of a ‘public limited company’ legal structure for
business. [8]
7. O/N 16/P12/Q1
(a) Define ‘joint venture’. [2]
(b) Briefly explain two advantages of joint ventures to the businesses involved. [3]
8. M/J 16/P13/Q5
(a) Analyse the advantages of a co-operative as a legal form of business. [8]
(b) Discuss the factors that could influence the success of a small business manufacturing
fashion clothing for children. [12]
9. O/N 15/P12/Q7/b
(a) Discuss why an entrepreneur might choose to become a franchisee rather than start an
independent restaurant business. [12]
10. O/N 15/P11/Q3
Explain why many tertiary sector businesses differentiate their services. [5]
11. O/N 15/P11/Q4/b
(a) Briefly explain two external sources of finance that could be used to fund the capital
expenditure of a partnership. [3]
12. M/J 15/P11/Q4
(a) Define the term ‘ franchise’. [2]
(b) Briefly explain two benefits for an entrepreneur of becoming a franchisee. [3]
13. O/N 14/P13/Q7/a
(a) Explain the strengths and weaknesses of a ‘co-operative’ legal structure for business. [8]
14. M/J 14/P13/Q7/a
(a) Explain how the main differences between the legal structures of sole traders and public
limited companies affect the way such businesses are financed. [8]
15. O/N 13/P12/Q2
(a) Define the term ‘private sector’. [2]
(b) Briefly explain two distinctive characteristics of public sector enterprises (for example
public corporations or nationalised industries). [3]
16. M/J 13/P13/Q4
(a) State two features of a ‘public limited company’. [2]
(b) Briefly explain two advantages to a sole trader of changing to a partnership. [3]
17. O/N 12/P13/Q1
(b) Briefly explain two disadvantages to a sole trader of changing to a private limited
company. [3]
18. O/N 12/P12/Q4
(a) Define the term ‘public limited company’. [2]
(b) Briefly explain two advantages a public limited company has compared to a private limited
company. [3]
19. M/J 12/P12/Q5/a
(a) Explain the advantages of a ‘co-operative’ as a form of business. [8]
20. M/J 12/P11/Q5/a
(a) Explain the advantages for a franchisee of a ‘franchise’ as a form of business. [8]
21. O/N 11/P11/Q1
(a) Define the term ‘sole trader’. [2]
(b) State three problems of operating as a sole trader. [3]
22. O/N 11/P13/Q1

(a) Define the term ‘partnership’. [2]
(b) Outline two advantages that a partnership might have over a sole trader. [3]
23. O/N 11/P13/Q3
Explain why service differentiation is important for businesses in the tertiary sector. [5]
24. M/J 11/P11/Q1/a
(a) State two objectives of a private sector business. [2]
25. O/N 10/P11/Q3
Explain how a public limited company might finance a large capital investment project. [5]
26. O/N 10/P11/Q4/b
(a) Explain two possible disadvantages to a sole trader of changing to a private limited
company. [3]
27. O/N 09/P12/Q1/a
(a) State two advantages of being a sole trader. [2]
28. O/N 07/P1/Q5
(a) Analyse the benefits which a private limited company might gain by becoming a public
limited company. [8]
(b) Discuss how different stakeholder groups might view the decision to change from private
limited company to a public limited company. [12]
29. M/J 07/P1/Q1/a
(a) Explain one objective of a public sector organisation in your country. [2]
30. M/J 06/P1/Q3
Explain the importance of profit maximisation for a public limited company. [5]
31. M/J 06/P1/Q1
(a) Outline one difference between the public sector and private sector of an economy. [2]
(b) Explain one difference between private and public limited companies. [3]
32. O/N 04/P1/Q1/a
(a) Define the term ‘free market economy’. [2]
33. M/J 04/P1/Q1
(b) Explain one disadvantage of being a sole trader. [3]
34. O/N 03/P1/Q1
(a) Distinguish between the public sector and private sector of an economy. [2]
(b) Explain why some goods and services are provided by the public sector in your
country. [3]
35. O/N 03/P1/Q6/b
(a) Discuss why the owners of a private limited company might wish to convert it into a public
36. M/J 03/P1/Q1/a
(a) Distinguish between secondary and tertiary levels of activity. [2]
1.3 Size of Business

1. M/J 19/P13/Q5/a
(a) Analyse the impact of small businesses on the development of a country. [8]
2. O/N 15/P12/Q3
Explain why small businesses are important for many economies. [5]
3. O/N 15/P13/Q1
(a) Define the term ‘internal growth’. [2]
(b) Briefly explain two reasons why many businesses set growth as an objective. [3]
4. O/N 14/P11/Q7/a, M/J 12/P13/Q5/a
(a) Explain the weaknesses of ‘family owned’ businesses. [8]
5. O/N 12/P11/Q1
(a) Define the term ‘limited liability’. [2]
(b) Briefly explain two advantages (other than limited liability) a private limited company has
over a sole trader. [3]
6. M/J 12/P12/Q5/b
(a) Discuss the factors that could influence the success of a small business. [12]
7. M/J 12/P11/Q5/b
(a) Discuss the importance of small businesses to the economy of your country. [12]
8. M/J 12/P13/Q5/b
(a) Discuss internal growth as a way of expanding a business. [12]
9. O/N 11/P12/Q4/b
(a) Explain two objectives a small business might have in the first year of trading. [3]
10. M/J 11/P13/Q5/a
(a) Explain the strengths and weaknesses of small businesses. [8]
11. M/J 11/P11/Q1/b
(a) Describe two methods for measuring the size of a business. [3]
12. O/N 09/P12/Q1/b
(a) Briefly explain two objectives a small business might have, other than profit maximisation.
[3]
13. O/N 08/P1/Q4/a
(a) State two ways of measuring the size of a business. [2]
14. O/N 05/P1/Q7/b
(a) Discuss whether the government should support small businesses in your country. [12]
15. O/N 05/P1/Q7/a
(a) Explain the advantages and disadvantages of being a small business in food retailing. [8]
16. O/N 04/P1/Q3/a
(a) State two different ways in which the size of a business might be measured. [2]
1.4 Business Objectives

1. O/N 18/P12/Q6
Discuss the extent to which the stakeholders of a large clothing retailer might want the business
to become more ethical and socially responsible. [20]
2. O/N 18/P11/Q5/b
(a) Discuss why the shareholders of a public limited company (PLC) might disagree with
having corporate social responsibility (CSR) as a business objective. [12]
3. M/J 18/P12/Q6
In recent years a significant number of businesses have been accused of being unethical.
Discuss whether senior managers should consider ethics when making business decisions. [20]
4. M/J 18/P11/Q3
Explain how ethics may influence the objectives of a business. [5]
5. M/J 18/P11/Q6
‘A business mission statement is only important if it directly affects the strategy and tactics of that
business.’ Discuss this view. [20]
6. M/J 18/P13/Q3
Explain why the objectives of a business may change over time. [5]
7. Mar 18/P12/Q6
‘A family retail business should stay small rather than setting growth as an objective’. Do you
agree? Justify your answer. [20]
8. O/N 17/P12/Q7
(a) Analyse the importance of corporate objectives and departmental objectives to the
success of a business. [8]
(b) Discuss why a bank might change its corporate objectives over time. [12]
9. O/N 17/P11/Q3
Explain how a business might benefit from acting ethically. [5]
10. M/J 17/P11/Q3
Explain why corporate objectives are important to a business. [5]
11. MAR 17/P12/Q3
Explain why a mission statement might be important for a multinational business. [5]
12. MAR 17/P12/Q5/b
(a) Discuss how ethics may influence the decisions of private sector banks. [12]
13. O/N 16/P11/Q1
(a) Define the term ‘mission statement’. [2]
(b) Briefly explain two limitations of mission statements. [3]
14. O/N 16/P13/Q5/b
(a) Discuss why senior managers leading large public limited companies might decide not to
have corporate social responsibility (CSR) as a business objective. [12]
15. M/J 16/P12/Q7
(a) Analyse the importance to a large business of setting corporate objectives. [8]
(b) Discuss how a large food retailer, with many shops, could effectively communicate
corporate objectives to its workforce. [12]
16. M/J 16/P11/Q6
Because there is conflict between profit and corporate social responsibility (CSR), private sector
businesses should not have CSR as an objective.’
Do you agree? Justify your view. [20]
17. O/N 15/P12/Q7/a
(a) Explain how the objectives of a social enterprise might differ from those of other private
sector businesses. [8]
18. O/N 15/P11/Q7
(a) Explain why a business might not behave ethically. [8]
(b) Discuss, with examples, how unethical business behaviour could damage the reputation
of a company. [12]
19. M/J 15/P12/Q1/b
(a) Briefly explain two ways in which the objectives of a social enterprise might be similar to
20. O/N 14/P12/Q3
Explain why many businesses have corporate responsibility as an objective. [5]
21. O/N 14/P11/Q3
Explain the importance of a mission statement to the employees of a public limited company.
[5]
22. O/N 14/P11/Q7/b
(a) Discuss why some businesses do not set a growth objective. [12]
23. O/N 14/P13/Q7/b
(a) Discuss how ethics may influence the activities of a business. [12]
24. M/J 14/P12/Q3
Explain why the objectives of a business could change over time. [5]
25. M/J 14/P13/Q6
Discuss the advantages and drawbacks for a business of setting corporate responsibility
objectives. [20]
26. M/J 13/P12/Q3
Explain how ethics could influence the objectives and activities of a private sector business.
[5]
27. M/J 13/P11/Q7/b
(a) Discuss the view that the only purpose of private sector businesses is to make profit, not
to pursue corporate responsibility objectives. [12]
28. M/J 13/P11/Q5/a
(a) Explain why the marketing objectives of a business need to be closely linked to its
corporate objectives. [8]
29. M/J 13/P11/Q2
(a) State two aims of a ‘mission statement’. [2]
(b) Briefly explain how a ‘mission statement’ might be effectively communicated to the
stakeholders of a business. [3]
30. O/N 12/P13/Q7/a
(a) Explain the link between marketing objectives and corporate objectives. [8]
31. M/J 12/P13/Q4
(b) Briefly explain two benefits of setting corporate objectives. [3]
32. O/N 11/P12/Q4
(a) Define the term ‘objective’ as used by a business. [2]
(b) Explain two objectives a small business might have in the first year of trading. [3]
33. O/N 11/P12/Q6
Discuss how the ethical decisions of a large clothing retailer might help or hinder its business
performance. [20]
34. O/N 10/P12/Q3
Explain the importance of the profit maximisation objective to a business. [5]
35. O/N 10/P11/Q6
Discuss the benefits to a business of setting ethical objectives. [20]
36. M/J 10/P12/Q6
Discuss how the objectives of stakeholder groups in a profitable business might be in
conflict. [20]
37. M/J 10/P11/Q3
Explain why it is important for a business to have clear objectives. [5]
38. M/J 10/P11/Q6
Discuss how the activities of a business might be constrained by ethical issues. [20]
39. O/N 09/P12/Q1/b
[3]
40. O/N 08/P1/Q4/b
(a) Briefly explain why growth may not be the most important objective for a business. [3]
41. M/J 08/P1/Q5/b
Discuss how the objectives of a manufacturing business might be affected by ethical
issues. [12]
42. M/J 08/P1/Q1
(a) State two objectives a business might set in the short run. [2]
(b) Briefly explain the importance to a business of setting objectives. [3]
43. M/J 06/P1/Q3
44. O/N 05/P1/Q2
Explain how a manufacturing business might be affected by ethical issues. [5]
45. M/J 05/P1/Q5/a

(a) Explain how the objectives of a business may change as it grows. [8]
1.5 StakeHolders In A Business

1. M/J 19/P12/Q3
Explain how the interests of two stakeholder groups could affect the decisions of a business. [5]
2. M/J 19/P13/Q5/b
(a) Discuss the view that a public limited company should prioritise the aims of its
shareholders rather than those of other stakeholder groups. [12]
3. MAR 19/P12/Q3
Explain why there might be conflict between two stakeholder groups of a large mining
company. [5]
4. O/N 17/P13/Q3
Explain the responsibilities employees have to the business that employs them. [5]
5. M/J 17/P11/Q5
(a) Analyse why a business needs to be accountable to its stakeholders. [8]
(b) Discuss how there could be conflict between the stakeholders of a fast food retailer. [12]
6. M/J 17/P13/Q7
(a) Analyse the rights and responsibilities of employees as stakeholders in a business. [8]
(b) Discuss how the stakeholders of a public sector organisation might be affected by a
reduction in Government financial support for the organisation. [12]
7. O/N 15/P11/Q7/b
(a) Discuss, with examples, how unethical business behaviour could damage the reputation
of a company. [12]
8. M/J 15/P13/Q1
(a) Define the term ‘stakeholder’. [2]
(b) Briefly explain two ways a public limited company is accountable to its shareholders. [3]
9. O/N 14/P13/Q3
With the aid of two examples, explain how the objectives of one group of business stakeholders
could conflict with those of another group. [5]
10. O/N 13/P13/Q4
(b) Briefly explain one way in which conflict may arise between different stakeholder groups
in a business. [3]
11. O/N 13/P11/Q3
Explain the rights and responsibilities of employees as a business stakeholder group. [5]
12. O/N 11/P13/Q6
Discuss how the closure of a business owning many large retail stores might affect different
stakeholders. [20]
13. M/J 11/P13/Q5/b
(a) Discuss the extent to which businesses are accountable to their stakeholders. [12]
14. M/J 11/P12/Q7/b

(a) Discuss the importance of published accounts to three stakeholder groups in assessing
the performance of a company which is planning to expand. [12]
15. M/J 10/P11/Q4
(a) State two different stakeholder groups in a business. [2]
(b) Briefly explain why one of the stakeholder groups you have identified in part (a) may be
interested in the performance of a business. [3]
16. M/J 08/P1/Q3
Explain how two different stakeholder groups might use the published accounts of a business.[5]
17. O/N 07/P1/Q5/b
(a) Discuss how different stakeholder groups might view the decision to change from private
1.1 Enterprise
1. M/J 19/P12/Q7/a
(a) Analyse the impact of social enterprises on the development of a country. [8]
Mark Scheme:
(a) Answers could include:
• Recognition of the purpose and objectives of social enterprises – businesses with mainly
social objectives that reinvest profit into social benefit activities.
• Commercial businesses that aim to make a surplus in socially responsible ways and distribute
any profit to society – business principles with social objectives – economic – social –
environmental objectives – triple bottom line businesses.
• Social enterprises enrich the types of business units in a country – provide services that PLCs
and other businesses cannot or do not want to provide – so important in developing a variety
of business responses and objectives.
• Examples of impact of social enterprises: – Provide finance for emerging entrepreneurial
projects; allow small businesses to be set up; provide finance for environmental
improvement; fill a gap when NGOs and charities run out of funds; supplement key
infrastructure systems.
• This can be very important in stimulating the economy and giving a different emphasis to
business objectives and opportunities.
2. O/N 18/P12/Q4
(a) Define the term ‘value added’. [2]
(b) Briefly explain two ways a restaurant could increase its value added. [3]
Mark Scheme:
(a) Value added can be defined as:
• the amount by which the value of a product/service is increased during the production
process
• the difference between the price of a finished product/service and the cost of the inputs
involved in producing it.
(b) • Reduce costs by changing supplier or purchasing in bulk or reducing wastage of ingredients.
• Increase prices to reflect enhanced product / service provision.
• Producing more unique / distinctive ‘celebrity chef’ meals.
• Creating a more superior/distinctive eating environment / ambience.
• Upgrade the kitchen to produce more distinctive food offerings.
• Offer a more comprehensive / distinctive menu.
• Carry out more effective promotion.
3. O/N 18/P11/Q5/a
(a) Analyse the qualities of a successful entrepreneur. [8]
Mark Scheme:
(a) Answers may include the following:
• Ability to develop innovative and viable business proposals and projects.
• Willingness to take calculated risks – especially financial.
• Persistent and determined.
• Self-confident and able to promote the business idea.
• Strong personality – energetic and driven.
• Self-motivated and multi-skilled. Good motivator.
• Ability to lead and inspire employees.

• Be persuasive and provide a vision for the future.
4. M/J 18/P13/Q7
(a) Analyse the potential advantages to a community of a business with ‘triple bottom line’
targets. [8]
(b) Discuss the role of ‘business enterprise’ to the development of a country. [12]
Mark Scheme:
(a) The ‘triple bottom line’ approach goes beyond the traditional measures of profits, return on
investment, and shareholder value to include social and environmental dimensions – profits, people
and the planet.
A triple bottom line business may provide benefits to a community such as:
• Economic – make profits to reinvest back into the business and the local / national economy
as well as to shareholders.
• Social – provide jobs or local support to disadvantaged sections of the community.
• Environmental – protect the environment and manage the business in an environmentally
sustainable way.
• These 3 benefits may be more valuable to a community than the traditional targets of a
private sector profit driven business.
The triple bottom line organisation (social enterprise) has the capacity to temper the extremes of a
purely capitalist / profit-centred approach to business activity and offer much more socially
responsible and valuable business performance.
(b) • Business enterprise is about entrepreneurial activity, taking risks, setting up businesses
raising capital, exploring business ideas.
• Those involved in ‘business enterprise’ make things happen – make a major contribution to
the development of business activity and the growth of a business economic sector.
• Create jobs, add value, make goods and services available.
• Increase living standards, raise taxation, create infrastructure possibilities.
• The economy develops – multi-national businesses are attracted.
• Increased use of IT and new technology.
• International competitiveness develops – exports.
• Finances for social development and cohesion created.
• Economic development takes place.
Evaluative comments may well consider that there are potential disadvantages to business
enterprise development such as unrestricted profit making or unregulated capitalism.
5. MAR 18/P12/Q2
(b) Briefly explain two qualities of a successful entrepreneur. [3]
Mark Scheme:
(a) An entrepreneur is someone who sets up a new business. A risk taker who supplies (own) capital
and organises factors of production.
(b) • Risk taker – able to take a calculated risk to invest in a business venture by seeing potential
and evaluating chances of success.
• Prioritisation / goal setting – able to decide between urgent and important matters and
make the best use of limited resources to guarantee success.
• Planning – able to put together a thoughtful, realistic business plan taking account of the
business’ strengths and weakness and considering contingencies.
• Multi-skilled – able to undertake many roles and tasks to get the business idea up and
running.
• Leadership – the ability to motivate those involved in the start up business.
• Resilient / Passionate / Visionary / Energetic / Self-motivated / Driven / Self-starter /
Multitasker / Focused / Flexibility / Positivity / Confidence / Creativity / Initiative / Low fear
of failure / Hard worker / Innovative
6. O/N 17/P12/Q1
(b) Briefly explain two aims of a social enterprise. [3]
Mark Scheme:
(a) A social enterprise is a business that has mainly social objectives; reinvests profits to benefit society;
a business whose main focus is not necessarily the making or maximising of profits; that pursues the
triple bottom line objectives; that engages in activities/social objectives such as creating work for the
unemployed or producing in an environmentally friendly way.
(b) NOTE: Questions 1(a) and 1(b) may well attract similar relevant points/information. Repeated
material in 1(b) is perfectly acceptable and should be rewarded as long as it is explained or
developed as evidence for a brief explanation of distinctive social enterprise aims.
• a social enterprise may not focus on making profits or maximising profits like a normal
business but rather seek to secure enough resources to provide services to the community
• a social enterprise may seek to achieve a triple bottom line set of objectives rather than
simply generate profits or maximize sales, or grow the business
• a social enterprise may have as its primary purpose the provision of jobs to local
disadvantaged citizens who may have difficulty in securing employment in traditional ways
• a social enterprise may engage in business activities such as sustainable production to
support and protect the environment
• a social enterprise may seek to give employees a ‘living wage’ and a supportive working
environment at the expense of maximising profits
7. M/J 17/P12/Q5/a
(a) Analyse problems a business could experience in its first year of trading. [8]
Mark Scheme:
(a) • establish and build a customer base of loyal returning customers.
• establish itself in the market.
• effectively manage cash flow – generate sufficient working capital.
• establish good relations with suppliers.
• follow an effective pricing strategy that allows the business to compete effectively.
Failure to achieve such objectives likely to lead to problems of:
• lack of cash and working capital
• uncompetitive production
• inability to effectively market the business
• insufficient demand to survive
• failure to secure external finance
• inability to repay start-up capital
8. M/J 17/P13/Q1
(a) Define the term 'opportunity cost'. [2]
(b) Briefly explain how business decisions involve opportunity cost, using an appropriate
example. [3]
Mark Scheme:
(a) Opportunity cost is the benefit of the next best alternative/option that is given up/foregone/lost.
(b) • Businesses have limited resources and need to make choices.
• The allocating of scarce resources between competing demands is at the heart of most
business decision making.
• A decision to invest in a particular asset/machine means that alternative capital expenditure
choices have been forgone.
• The opportunity cost of paying a generous dividend to shareholders is the lost opportunity
to better reward employees.
• Businesses become very competitive to reduce the strength of the next best alternative.
9. O/N 16/P13/Q3
Explain why many new businesses fail within their first year. [5]
Mark Scheme:
Answers could include:
Insufficient capital — run out of cash for day to day operational needs (working capital).
Flawed business plan/model — inadequate information and too ambitious forward projections. Poor
management — entrepreneurs without experience in finance, sales, hiring — poor leadership and decision-
making.
Failure to understand customers — too 'product led'
No real differentiated product/service and no real understanding of the competition.
Lack of business visibility — website.
Over expansion — too soon.
Too much red tape — bureaucratic restrictions.
Unable to respond to external environmental changes — recession
Effective explanation of the factors leading to early new business failure (4—5 marks)
Limited explanation of the factors leading to early new business failure (2—3 marks)
Understanding of new business and/or business failure (1 mark)
10. O/N 16/P13/Q5/a
Analyse the qualities of a successful entrepreneur. [8]
Mark Scheme:
(a) Level 4 Good analysis of the qualities needed by an entrepreneur to be successful 7-8
Level 3 Some analysis of the qualities needed by an entrepreneur to be successful 5-6
Level 2 Some application of entrepreneurial qualities to a business context -
Level 1 Understanding of entrepreneurs 1-2
Level 0 No creditable content 0
Have innovative and viable business ideas/proposals.
Willing to take risks.
Self— confident and assertive.
Multi-skilled.
Committed and self-motivated.
Good leaders/motivators.
Ability to raise finance/convince investors.
Perceptive answers may consider how to measure success and/or question the time element of
success — for how long will a business survive.
11. M/J 16/P12/Q1

(b) Briefly explain two reasons why new businesses often fail. [3]
Mark Scheme:
(a) Defined as someone who takes risks.
Starting/managing/making decisions in a business.
Organises the factors of production.
Creative/has new ideas/spots gaps in the market.
Sound definition given (any 2 of the above). [2]
Partial definition given (limited understanding). [1]
(b) Despite the enthusiasm and skills of an entrepreneur, many new businesses fail within one year.
Lack of finance/capital – banks unwilling to lend.
Poor cash flow management.
Poor management skills – entrepreneur’s not always good operational managers.
Severe competition – large companies/competitors squeeze.
Limited portfolio of products/services.
Very vulnerable to change and environments/threats – e.g. recession, legal requirements –
technological change.
Lack of market understanding.
Lack of reputation/brand.
Lack of record keeping.
Please accept and reward other relevant points.
Sound explanation of two reasons for failure. [3]
Sound explanation of one reason or partial explanation of two. [2]
Partial explanation of one reason or a list of two. [1]
12. M/J 15/P12/Q1
(b) Briefly explain two ways in which the objectives of a social enterprise might be similar to
Mark Scheme:
(a) A social enterprise has been defined as a business with primarily social objectives whose surpluses
are reinvested in the business or the community, rather than providing profits for shareholders or
owners.
• Full definition – sound understanding. [2]
• Partial definition – limited understanding. [1]
(b) Although a social enterprise is a business that has specific social objectives and is not solely in pursuit
of profit, it still shares some common features with other types of businesses such as:
It is a business that seeks to make a surplus/profit – It is concerned with being efficient and effective.
It will likely face competition from other businesses in the same market or industry.
It uses business principles and processes to achieve its objectives.
It will have concerns for its workforce.
It will aim to deliver quality goods and services.
It is of course committed to social/environmental responsibility as can be other businesses.
Sound explanation of TWO similarities. [3]
Sound explanation of ONE similarity or partial explanation of TWO. [2]
Partial explanation of ONE similarity or simple statement of TWO. [1]
13. O/N 14/P12/Q7

(a) Explain the aims of a ‘social enterprise’ organisation. [8]
(b) Discuss the importance of ‘business enterprise’ in your country. [12]
Mark Scheme:
(a) A business with mainly social objectives that reinvests profits into benefiting society, rather than
maximising returns to owners.
Have distinctive aims and objectives – while sharing some characteristics of other types of
organisation – they rely on the market and sales for income – but they have a sense of social mission
and have social ownership structures.
They seek to use business solutions to achieve public good – and operate in a wide range of areas,
e.g. health and social care, transport, childcare in U.K.
So they have social and business aims (often referred to as “double bottom line”, or some add
environmental aims and are referred to as “triple bottom line”.
They have economic objectives – profit to reinvest.
They have social objectives – provide jobs and support communities, often disadvantaged sections
of communities.
They often have environmental objectives – to manage the business in an environmentally
sustainable way.
Analysis of the distinctiveness of social enterprise organisation aims. [7–8]
Good explanation of the distinctive aims of social enterprises. [5–6]
Limited explanation of the distinctive aims of social enterprises. [3–4]
Little understanding of social enterprise organisations. [1–2]
(b) Business enterprise defined as initiatives concerned with taking risks and setting up businesses
making things happen – business opportunities are identified and calculated risks are taken.
Those who take risks and show enterprise called entrepreneurs – they make a major contribution to
the development of business enterprise in a country – seize initiatives – add value, create jobs – make
profits – contribute to social investment via taxation.
Business enterprise(s) considered to be important in that:
Jobs are created.
Economic growth – increased living standards – tax revenues for governments to spend on
infrastructure.
Businesses grow, expand, diversify and support a more developed economy.
Adds dynamism to an economy – increased use of I.T. and new technology.
Helps improve international competitiveness – exports.
Helps achieve social cohesion in a country and supply important social goods.
Economic development comes from economic growth which is significantly supported by business
enterprise – countries become industrialised and modernised through sustained business enterprise
activity.
Evaluative comment on the importance of business enterprise(s) to the development of a country
(in context). [9–12]
Analysis of the importance of business(s) enterprise to the development of a country (in context).
[7–8]
Discussion of the importance of business enterprise(s) to the development of a country. [3–6]
Limited understanding of business enterprise(s). [1–2]
14. O/N 13/P11/Q6
Discuss the differences and similarities between ‘business enterprise’ and ‘social
enterprise’. [20]
Mark Scheme:
Business enterprise defined as activity where the primary motive is profit – production of goods/ services to
consumers at a profit – create wealth.
Social enterprise more narrowly defined – social mission-driven organisations applying marketbased
strategies to achieve a social purpose/environmental purpose – re-investment of profits into community or
back into business.
In many ways they are very different – but in some ways very similar. – Business enterprise may be identified
as: (entrepreneurs) – create employment – generate business activity.
increase economic growth – GDP of a country increased.
business grows and develops – multi-nationals.
innovation and technological development takes place.
international competitiveness improved – export markets.
economic development improves social cohesion.
all the benefits of a successful market enterprise system.
but can be socially responsible (and socially irresponsible) and advance social issues and cohesion.
Social enterprise may include: (triple bottom line)
specific social benefit to economies (national and local).
create employment for often disadvantaged employees and communities.
protect and advance environmental issues alongside production processes.
re-distribute production benefits, not just to shareholders or a limited number of shareholders.
complement wholly public sector owned organisations.
highlight ways in which business enterprise can be improved.
in so doing create employment – generate taxation and economic benefit.
Social enterprise units can be entrepreneurial and very efficient, and business enterprise units can be very
socially responsible.
Evaluative comment on the differences and similarities between ‘business enterprise’ and ‘social enterprise’
for economies. [17–20]
Analysis of the differences and similarities between ‘business enterprise’ and ‘social enterprise’ for
economies. [13–16]
Discussion of the differences and similarities between ‘business enterprise’ and ‘social enterprise’ for
economies. [11–12]
Some understanding of the differences and similarities between ‘business enterprise’ and ‘social enterprise’
for economies. [5–10]
Very little understanding of ‘business enterprise’ and/or ‘social enterprise’. [1–4]
15. M/J 13/P13/Q7
(a) Explain the likely conflict between the ‘triple bottom line’ objectives of a social enterprise
operating in your country. [8]
(b) Discuss the role business entrepreneurs could play in the future development of your
country. [12]
Mark Scheme:
(a) The triple bottom line’ is the definition of the objectives of a social enterprise organisation –
economic, social and environmental. It is said to be a challenge in that:
The focus of a triple bottom line business is broader than a simple profit-making organisation and a
Social Enterprise is a business that seeks to make money in socially responsible ways through the
pursuit of three primary objectives: economic, social, environmental. As well as making money in a
socially responsible way Social Enterprises often seek to invest any surplus (profit) into society.
A Social Enterprise organisation, like other organisations, often has to make decisions based on
multiple and sometimes conflicting/competing objectives but the focus will be on the ‘triple bottom
line’.
The 3 ‘triple bottom line’ objectives are: 1. Economic – make a profit and survive. 2. Social – ensure
the well-being of people/employees, disadvantaged in the community, customers etc. 3.
Environmental – protecting the environment and managing the business in an environmentally
sustainable way.
There may well be tensions/conflicts between the 3 primary objectives of a Social Enterprise. Perhaps
the most notable tension is often caused by the need for a Social Enterprise to remain economically
viable and sustainable – being efficient, productive, and profitable as it seeks to achieve its social and
environmental objectives. There may well be tensions and conflicts within each of the 3 objectives
for example establishing priorities for social and environmental objectives.
Analysis of likely conflict between the ‘triple bottom line’ objectives of a Social Enterprise. [7–8]
Good explanation of likely conflict between the ‘triple bottom line’ objectives of a Social Enterprise.
[5–6]
Limited explanation of likely conflict between the ‘triple bottom line’ objectives of a Social Enterprise.
[3–4]
Little understanding of the ‘triple bottom line’ and/or a Social Enterprise. [1–2]
(b) The discussion is likely to refer to the contribution business entrepreneurs might make to a country
in terms of the business enterprise culture and activities they bring or develop. An initial explanation
of entrepreneurial characteristics may follow with an emphasis on risk taking, innovation, creating
and strengthening business ventures, and generally improving the national business enterprise
culture and performance.
The contribution they make or may make to the future development of a country is likely to depend
on factors such as:
The stage of development (economic) that a country is presently in – The quality of the skills of the
entrepreneurs.
The support and encouragement given to the entrepreneurs by the government of a country.
The external issues that may affect a country in the future, given a dynamic and political external
environment.
The role of business entrepreneurs could include activities such as:
Stimulating business enterprise in whatever form as the engine of economic progress and
development.
Support infrastructure development and progress.
Create jobs – multiplies effect on economy.
Fostering entrepreneurial spirit – innovation – change.
Creating opportunities for funding – taking advantage perhaps of international funding and support.
Entering into partnerships with government-funded structures and organisations. – Educating
people of the potential benefits of market activity and private sector commerce.
Some evaluative comment on the role of business entrepreneurs in the future development of a
country. [9–12]
Analysis of the role of business entrepreneurs in the future development of a country. [7–8]
Good discussion of the role of business entrepreneurs in the (future) development of a country. [3–
6]
Limited discussion of business entrepreneurs/enterprise issues. [1–2]
16. M/J 12/P11/Q1/a
(a) State two aims of a social enterprise organisation. [2]
Mark Scheme:
(a) Aims could include: to advance social objectives using business entrepreneurial activities and
methods…investment of surpluses in community initiatives rather than maximising returns to
owners…the pursuit of triple bottom line objectives (social, economic, environmental)…concern for
people, planet, profit…concern for human capital, fair employment practices throughout the
production chain…sustainable environmental practices…wider definition of profit to encompass
economic value created and the distribution of real economic benefit to society.
Accurate statement of ONE aim. [1]
Accurate statement of TWO aims. [2]
17. M/J 11/P13/Q3
Explain why many businesses fail within the first year of trading. [5]
Mark Scheme:
Answers might interpret the question as a small business (probably so but not necessarily always). Estimated
that 60% – 70% of small businesses fail in early years.
Reasons given may include:
lack of focus – unclear objectives – priorities not determined
failure to deliver a product/service demanded by customers
business model may be flawed
poor cash management – inadequate budgeting and planning
growing too fast
lack of business and management skills
under-capitalised
staffing problems
environmental/economic conditions.
Credit examples and frameworks used e.g. internal v external factors.
Limited response – a few factors identified/stated (possibly a list). [1–2]
Identification and explanation of at least two relevant factors. [3–4]
Identification and explanation of a good range of relevant factors which clearly relate to early business failure.
[5]
18. M/J 09/P1/Q7
(a) Discuss the problems a new business might experience in its first year of trading. [8]
(b) Explain how market research might be used to reduce some of the problems faced by a
new start-up business. [12]
Mark Scheme:
(a) Discussion could initially define a new business and give an example – problems identified and
discussed could include the following: financial – start-up costs – cash flow – capital funding;
marketing – establishing a position, decisions on advertising – promotion; production – relations with
suppliers – stock control; pricing – strategy – competitors breakeven – profit etc. There are endless
possibilities dependent on the context and type of new start-up business chosen. Focus must be on
some sort of new business in a first year of trading.
Sound analysis of specific identified problems facing a new business in the first year of trading.[7–8]
Analysis of early (first year) new business issues/problems. [5–6]
Some understanding of early (first year) new business issues/problems. [3–4]
Limited awareness of new business problems. [1–2]
(b) Explanation could initially define and discuss market research – primary and secondary. Candidates
may assume the context of 7 (a) – first year trading or adopt an alternative timeframe. Examples of
the use of market research in reducing problems of a new start-up business might include reference
to issues such as securing information on the product/service provided – competitor products –
possible pricing strategies – strength of competitors – source of competition – alternative promotion
opportunities – size of market – how segmented – customer behaviour etc – reduce uncertainty risk
– provide quality data/information.
Evaluative comment e.g. comment on the significance of market research in reducing problems of a
new start-up business. [11–12]
Analysis of market research activities/information that might reduce problems facing a new start-up
business. [8–10]
Shows understanding of market research activities relevant to problems facing a new startup
business. [3–7]
Shows some understanding of market research. [1–2]
19. M/J 03/P1/Q1/b
(a) Outline the benefits to a country of successful businesses. [3]
Mark Scheme:
(a) Some understanding but benefits not explained. 1
Substantially full but incomplete explanation of benefits. 2
Full explanation of benefits. 3
1.2 Business Structure

1. M/J 19/P12/Q7/b
(a) ‘The purchase of an internationally recognised fast food franchise guarantees business
success.’ [12]
Discuss this view
Mark Scheme:
• An understanding of the advantages of engaging in business activity via a franchise.
• Advantages of using the name and logo of a successful business offers such opportunities
as:
– More chance of business success when using an established brand and product.
– National / international promotion is available, often at nil or limited cost.
– Training and advice offered by franchiser.
– Location of business protected.
– Supplies of food guaranteed in terms of quality and consistency.
• However, is a franchisee guaranteed success?
• There are significant costs to pay before ‘profit’ is achieved.
• The business still needs to be effectively and efficiently managed – e.g. quality of serving and
food production employees – is there managerial capability – what happens if the franchise
business suffers as a result of recession in particular companies – or reputation suffers – or
customer tastes change?
• It also depends on what is meant by ‘business success’ – short-term – long-term – profits –
expansion?
• Discussion of points referred to in bullet points 6 and 7 offer opportunities for candidates to
make evaluative comments on the provocative statement at the head of this question.
• Effective evaluation is likely to be evidenced by a consideration / discussion of the extent to
which business success is likely to be guaranteed by a fast food franchise and of other factors
which are associated with business success.
2. M/J 19/P11/Q4
(b) Briefly explain two possible disadvantages to a sole trader of changing to a private limited
company. [3]
Mark Scheme:
(a) A business owned by private shareholders (1).
A small to medium-sized company (1).
Owned by shareholders (1).
Shareholders have limited liability (1).
Shareholders are often members of the same family (1).
The business is a separate legal entity (1).
Cannot sell shares to general public / stock exchange (1).
Sound definition 2 of the factors listed above (2 marks)
Partial definition 1 of the factors listed above (1 mark)
No creditable content. (0 marks)
(b) Answers could include:
• Loss of 100% ownership of the business.
• Loss of control of the business (might not be a majority shareholder).
• Cost of changing to a private limited company.

• May lose influence over key decisions such as distribution of profit, future growth policies.
• Needs to produce end of year accounts – more transparency of financial affairs.
• Information disclosure could make a business competitively disadvantaged.
Sound explanation of two disadvantages to a sole trader of changing to a private limited company.
(3 marks)
Sound explanation of one disadvantage or partial explanation of
two disadvantages to a sole trader of changing to a private limited company. (2 marks)
Partial explanation of one disadvantage or a list of two disadvantages to a sole trader of changing to
a private limited company. (1 mark)
3. O/N 18/P13/Q1
(b) Briefly explain one advantage and one disadvantage to a business of operating as a public
limited company rather than as a private limited company. [3]
Mark Scheme:
(a) A small to medium sized business that has a separate legal entity and is owned by shareholders often
members of the same family. Shareholders have limited liability and shares cannot be sold to the
general public/or on stock exchange
(b) Advantages:
• Easier to raise capital e.g. from existing/new investors.
• To give company a more prestigious profile – improved reputation.
• Greater creditworthiness e.g. easier to obtain loans.
• The opportunity to more easily make acquisitions e.g. by offering shares to the shareholders
of the target firm.
• status may reduce expenditure on marketing e.g. greater discounts.
Disadvantages:
• Short-term pressure for profit maximisation/share price may mean compromising overall
business aims.
• More media exposure – potentially more accountability.
• Greater transparency – accounts must be audited/fuller information on performance
provided.
• No control over who buys shares/less control over business – vulnerable to a takeover/a
majority shareholder having a greater say how the business is run.
• Amount of finance to set up plc is higher.
• More documentation required to set up.
4. O/N 18/P13/Q5/a
(a) Analyse the advantages of a ‘partnership’ as a legal structure for the owners of a small
business. [8]
Mark Scheme:
(a) • Two or more people forming a business with shared capital, investment and shared
responsibilities.
• It overcomes some of the drawbacks of a sole trader.
• Decisions are shared.
• New partners can provide additional capital.
• It is relatively easy to set up with few legal formalities.
• Does not have to publish its accounts.
• Cover for holidays/sickness can be provided by other partners.

• Allows specialisation within the business.
• Deeds of partnership can regularise the management roles of partners, voting rights,
management roles.
• In some countries, limited liability partnerships can be set up.
• Popular form of business for small service companies such as architects – flexibility with a
measure of organisational security.
5. M/J 17/P13/Q4/a, M/J 13/P13/Q1/a
(a) Define the term ‘share capital’. [2]
Mark Scheme:
(a) Share capital is the total value of capital/finance raised from shareholders through the issue of shares
or capital used by shareholders to buy shares in a plc.
Sound definition (2 marks)
Partial definition (limited understanding) (1 mark)
No creditable content (0 marks)
6. MAR 17/P12/Q5/a
(a) Analyse the strengths and weaknesses of a ‘public limited company’ legal structure for
business. [8]
Mark Scheme:
(a) a public limited company – a company that can sell shares to the general public on a stock exchange
and has limited liability.
Strengths:
• business has a separate legal identity
• limited liability for shareholders
• ability to raise large sums of capital - no limitation on number of shares
• shares are freely transferable - providing liquidity for shareholders
• provides prestige and status
• increased opportunity to make acquisitions by offering shares
• may find it easier and cheaper to borrow form banks
• tax advantages vis a vis other organisation structures.
Weaknesses:
• complex legal formalities to form a public limited company - costly and time consuming
• strict controls and regulations to protect the interests of the ordinary shareholder
• requirement to file accounts
• the original owners may lose control
• risk of takeover
• financial markets will determine the value of the company through the trading of the shares
• greater public scrutiny of company performance and activities
• may lead to governance/ management problems
7. O/N 16/P12/Q1
(a) Define ‘joint venture’. [2]
(b) Briefly explain two advantages of joint ventures to the businesses involved. [3]
Mark Scheme:
(a) Two or more businesses/people agree to work together (1 mark) on a particular project/product or
business enterprise (1 mark) (A distinct business unit/division may be set up or just informal
collaborative arrangements).
Sound definition given (2 marks)
(b) Advantages may include:
Share strengths, minimise risk and increases opportunity for competitive advantage in business
ventures.
Given access to new resources, markets, or distribution channels.
Particularly useful for small businesses wanting to spread risks — e.g. joint advertising, marketing,
R&D.
Popular way of entering new, emerging markets.
May be used by large businesses to shut out the competition.
Loyal customers of both companies are likely to purchase the new product or service and the
customer base is therefore widened.
NB: do not accept economies of scale as an advantage unless it is linked to a new project/service
coming out of the new venture
Two advantages for joint ventures soundly explained (3 marks)
One advantage soundly explained or two partially explained (2marks)
One advantage partially explained or a list of two (1 mark)
8. M/J 16/P13/Q5
(a) Analyse the advantages of a co-operative as a legal form of business. [8]
(b) Discuss the factors that could influence the success of a small business manufacturing
fashion clothing for children. [12]
Mark Scheme:
(a) 4 Good analysis of the advantages of a co-operative 7–8
3 Some analysis of the advantages of a co-operative 5–6
2 Some explanation/application of the advantages of a co-operative3–4
1 Limited understanding of co-operative businesses1–2
0 No creditable content0
Co-operatives are joint ownership organisations (producer, workers, consumer).
A distinctive type of business organisation – often a significant amount of democratic control and
profits shared/distributed in proportion to members’ investment.
Producer co-operatives common in agriculture in developing countries.
Advantages claimed for co-operatives include:
Members/users are involved and have opportunity to direct and control the business
The business is designed and operated specifically for the members/users
Resources are pooled for mutual gain
Increased purchasing power with suppliers
Increased marketing power – joint advertising
More consumer power – less social/environmental damage
Allows members with common interests to work together and assume responsibility (e.g. village
post office/shop).
(While a brief reference to the limitations of co-operatives may be relevant, this answer needs to
focus on the advantages of co-operative businesses).
(b) Level 4 Effective evaluation of factors influencing small business success in context 9-12
Level 3 Limited evaluation of factors influencing small business success in context 7-8
Level 2 Understanding of small business and/or success factors 3-6
Level 1 No creditable content 1-2
Answers may include:
Definition of small businesses and their characteristics
Success factors could be owner/venture/economy specific
Reference to the specific advantages and limitations of the context of a small niche market
manufacturer
Degree of owner business expertise, experience
Degree of capitalisation/under-capitalisation
Relevance of business objectives (measured growth)
Quality of business systems/functions (marketing, product, development, costing, planning)
Level and type of competition • Viability of business model chosen
Luck!
Reward particular application to the niche market of children’s fashion clothing.
9. O/N 15/P12/Q7/b
(a) Discuss why an entrepreneur might choose to become a franchisee rather than start an
independent restaurant business. [12]
Mark Scheme:
(a) The decision to adopt a franchisee model for restaurant ownership is likely to be influenced by the
suggested advantages of a franchisee arrangement:
You adopt an existing successful/established business.
You operate an established brand and reduce risks.
The initial investment is probably smaller.
An entrepreneur can focus on operating and driving the established brand.
Ability to benefit from a franchised business relationship.
Less likely to fail.
In the short term probably more profitable. These are advantages of a franchisee. There are
limitations of course (and these could be mentioned in an evaluative comment) but this question
requires a focus on the entrepreneurial advantages of choosing a franchisee arrangement.
Evaluative comment on a decision to choose a franchisee business model, in context. [9–12]
Analysis of a decision to choose a franchisee business model, in context. [7–8]
Discussion of the advantages of a franchisee business model. [3–6]
Limited understanding of the franchisee business model. [1–2]
10. O/N 15/P11/Q3
Explain why many tertiary sector businesses differentiate their services. [5]
Mark Scheme:
Answers could well initially define the terms in the question:
tertiary sector businesses are those that provide services to consumers and other businesses such as
banking, hotels, tourism, retailing and transport
differentiation is the process of making a product or service so distinctive that it stands out from competitor
products/services in the perception of a consumer
Given these definitions the reasons why tertiary sector businesses try to differentiate their services could
include:
to establish and gain market share

to establish and maintain a reputation
to persuade customers to pay a particular price for the service
to create an exclusive purchasing environment
to create a unique selling proposition (USP)
to survive and thrive in a very competitive environment
to establish a perceived difference amongst consumers for services that are essentially much the same
Sound explanation of why tertiary businesses might differentiate their services. [4–5]
Explanation of why differentiation is important to businesses with some limited reference to tertiary
businesses. [2–3]
Limited reference to tertiary businesses and/or differentiation. [1]
11. O/N 15/P11/Q4/b
(a) Briefly explain two external sources of finance that could be used to fund the capital
expenditure of a partnership. [3]
Mark Scheme:
(a) The capital expenditure requirements of a partnership might be considered to be relatively small as
compared to those say of a plc. Nevertheless for a partnership, capital expenditure for say installing
a new IT system might well require significant external financing. ‘External’ sources to fund such
capital expenditure could include:
new partner/s investing
hire purchase
sale/lease back of assets
medium/long term loan
Government grants/allowances
borrow from friends
Sound explanation of two relevant external sources of finance. [3]
Sound explanation of one relevant external source or partial explanation of two. [2]
Partial explanation of one relevant external source or simple statement of two. [1]
12. M/J 15/P11/Q4
(a) Define the term ‘ franchise’. [2]
(b) Briefly explain two benefits for an entrepreneur of becoming a franchisee. [3]
Mark Scheme:
(a) A franchise can be defined as a business that has the right to use the name, logo and trading systems
of an existing, successful business – (the use of a successful business model under licence.)
A full definition – a sound understanding. [2]
A partial definition – limited understanding. [1]
(b) Benefits of operating a franchised business could include:
reduced risk of business failure.
dealing with an established brand/product.
advice/training available from franchisor.
marketing and advertising initiated and funded by franchisor.
quality assured supplies guaranteed.
market segment/area protected by the franchisor.
easier to obtain loan finance.
Sound explanation of TWO benefits. [3]
Sound explanation of ONE benefit or partial explanation of TWO benefits. [2]
Partial explanation of ONE benefit or simple statement of TWO benefits. [1]

13. O/N 14/P13/Q7/a
(a) Explain the strengths and weaknesses of a ‘co-operative’ legal structure for business. [8]
Mark Scheme:
(a) These are joint ownership organisations – consumer, producer, agricultural worker co-operatives –
member owned – meet common economic, social and cultural needs of members.
Strengths:
Easy to set up.
Open membership.
Democratic management.
Shared objectives.
More responsible to communities and customers.
Share surplus.
Limited liability.
Weaknesses:
Likely limited resources.
Management can be inefficient.
Disputes and differences can occur.
Longer decision-making process.
Lack of capital.
Mass of members may lose interest.
Analysis of the strengths and weaknesses of co-operative organisations. [7–8]
Good explanation of the strengths and weaknesses of co-operative organisations. [5–6]
Limited explanation of the strengths and/or weaknesses of co-operative organisations. [3–4]
Little understanding of co-operative organisations. [1–2]
14. M/J 14/P13/Q7/a
(a) Explain how the main differences between the legal structures of sole traders and public
limited companies affect the way such businesses are financed. [8]
Mark Scheme:
(a) Sole traders have sole responsibility for raising business finance such as own capital, bank overdrafts
and loans and have unlimited liability. Likely to mean severe restrictions on the amount of finance
that can be raised. The formation of a limited company could lead to greater access to funds and
would limit personal liability.
Public limited companies have the legal right to sell shares to the public and thus have the potential
to raise significant initial and new investment capital. Likely to be large businesses and more able to
access alternative funding sources.
Each has its own distinctive features and each will have particular access routes for short, medium
and long term sources of finance.
Each will have different internal and external financial requirements and sources.
Analysis of the two legal business structures and their sources of finance. [7 – 8]
Good explanation of the two legal business structures and their sources of finance. [5 – 6]
Limited explanation of the two business structures and/or their sources of finance. [3 – 4]
Little understanding of the two business structures and/or sources of finance. [1 – 2]
15. O/N 13/P12/Q2
(a) Define the term ‘private sector’. [2]
(b) Briefly explain two distinctive characteristics of public sector enterprises (for example
public corporations or nationalised industries). [3]
Mark Scheme:
(a) The ‘private sector’ is defined as businesses owned and controlled by individuals or groups of
individuals not by the state/government (and managed for profit).
Accept responses that are not restricted to a definition of a private sector business or organisation
and discuss concepts such as the price mechanism and the role of the market.
Partial definition. [1]
Sound definition. [2]
(b) Characteristics of public sector enterprises may include:
Owned/controlled by the government.
Profit is not likely to be a major objective.
Social objectives are a priority.
May be loss-making or subsidised.
Finance comes mainly from government/state.
May be monopoly/critical services.
May be subject to direct political interference.
Produce merit goods.
Partial explanation of one characteristic or a list of two. [1]
Sound explanation of one characteristic or partial explanation of two. [2]
Sound explanation of two characteristics. [3]
16. M/J 13/P13/Q4
(a) State two features of a ‘public limited company’. [2]
(b) Briefly explain two advantages to a sole trader of changing to a partnership. [3]
Mark Scheme:
(a) The features of a public limited company include:
Limited liability.
Legal personality.
Public reports and accounts required.
Shares, traded on Stock Exchange.
Often large companies.
Continuity assured.
Capital can be raised and dividends paid out.
Management separate from ownership.
One relevant feature of a PLC stated. [1]
Two relevant features of a PLC stated. [2]
(b) Advantages may include:
Shared decision making.
Additional capital injection.
Business risk shared.
Opportunity for specialisation in management areas.
Partial explanation of one advantage or simple statement of two. [1]
Sound explanation of one advantage or partial explanation of two. [2]
Sound explanation of two advantages. [3]
17. O/N 12/P13/Q1
(b) Briefly explain two disadvantages to a sole trader of changing to a private limited
company. [3]
Mark Scheme:
(a) A private limited company, usually a small or medium sized business owned by shareholders often
from the same family – shares can only be sold privately (not to the general public), they have limited
liability.
a partial definition [1]
a full definition. [2]
(b) Disadvantages could include: legal procedures and costs involved in the change, the loss of complete
control over the business – now becomes answerable to other shareholders, no longer keeps all the
profits, must now send end of year accounts to appropriate authorities, less secrecy over financial
affairs, more interference likely in decisions relating to work practices, growth plans etc.
partial explanation of ONE disadvantage or statement of TWO [1]
full explanation of ONE disadvantage or partial explanation of TWO [2]
full description of TWO disadvantages. [3]
18. O/N 12/P12/Q4
(a) Define the term ‘public limited company’. [2]
(b) Briefly explain two advantages a public limited company has compared to a private limited
company. [3]
Mark Scheme:
(a) Public limited companies are companies with limited liability with the right to sell shares to the
general public and have shares quoted on the national stock exchange – the most common form of
legal organisation for large businesses.
partial definition [1]
full definition. [2]
(b) Advantages of a public limited company over a private limited company include:
The right to advertise shares for sale and have them quoted on the stock exchange, means that
potentially large sums of money can be raised from public issue of shares, also means existing
shareholders can quickly sell shares if they wish, this flexibility of share buying and selling encourages
the public to buy shares and invest in the business, the ability to raise substantial funds may facilitate
significant growth opportunities, recruit more experienced staff and make more substantial capital
investment decisions.
partial explanation of ONE advantage that a public limited company has over a private limited
company or a statement of TWO advantages [1]
sound explanation of ONE advantage or partial explanation of TWO advantages of a public limited
company over a private limited company [2]
sound explanation of TWO advantages of a public limited company over a private limited company.
[3]
19. M/J 12/P12/Q5/a
(a) Explain the advantages of a ‘co-operative’ as a form of business. [8]
Mark Scheme:
(a) Cooperatives are joint ownership organisations…..different types–producer, consumer, worker.
Exist to provide a service to their members, owners, and the public, and are a distinctive type of
business organisation. There is often a significant amount of democratic control and profits often
shared/distributed to members in proportion to investment. Consumer cooperatives generally in
Europe and Japan. Producer cooperatives common in agriculture particularly in developing
countries. Advantages include opportunities for joint ownership–more employee motivation,

shared objectives, opportunity to influence/participate in decisions, produce a distinctive supportive
culture, idealistic values, strength in unity, strength in raising investment capital, stronger in
negotiations with buyers, more responsible to customers and community, can be innovative.
Analysis of the advantages of the cooperative model of business. [7–8]
Good explanation of the advantages of the cooperative model of business. [5–6]
Limited explanation of the cooperative model of business. [3–4]
Little understanding of the cooperative model of business. [1–2]
20. M/J 12/P11/Q5/a
(a) Explain the advantages for a franchisee of a ‘franchise’ as a form of business. [8]
Mark Scheme:
(a) Franchises are a way of buying into an established business name, brand and success. The franchisee
might be organised as a sole trader, partnership, cooperative, or limited company – pays a fee for the
franchise, pays royalties to the franchiser…benefits from the market position and
advertising/marketing of the established business…may get help, advice, training from the
franchiser…examples include Body Shop, McDonalds, Pizza Hut.
Advantages include: a route into business – relatively small amount of capital required – motivation
in running own business without unlimited risks – selling a recognized product/service – backed by
successful marketing and business methods – more likely to succeed than a single independent
entrepreneur.
Analysis of the advantages of the franchise model of business [7–8]
Good explanation of the advantages of the franchise model of business [5–6]
Limited explanation of the franchise model of business [3–4]
Little understanding of the franchise model of business [1–2]
21. O/N 11/P11/Q1
(b) State three problems of operating as a sole trader. [3]
Mark Scheme:
(a) A sole trader business is:
a business owned and run by one person
an unincorporated business
single owner takes all decisions
takes all profits/losses
(may have employees).
A definition that indicates understanding. [1]
A definition that indicates full understanding. [2]
(b) Possible responses may include:
limited financial resources, unlimited liability
personal responsibility for all decisions
limitations of the one individual
no continuity of existence, lack of economies of scale
lack of specialisation in management • long hours of working
takes all risk.
ONE problem accurately stated. [1]
TWO problems accurately stated. [2]
THREE problems accurately stated. [3]
22. O/N 11/P13/Q1

(a) Define the term ‘partnership’. [2]
(b) Outline two advantages that a partnership might have over a sole trader. [3]
Mark Scheme:
(a) A partnership is two or more people forming an unincorporated business with unlimited liability
status – normally with the objective of making a profit. There is joint responsibility for running the
business and for sharing the profits/losses. A partnership may be regulated by a partnership
agreement.
A definition that indicates partial understanding. [1]
A definition that indicates full understanding. [2]
(b) Advantages could include:
possibly greater input of financial investment
more skills and expertise available and more opportunity for specialisation
partners can share decision-making, give moral and practical support to each other
share the risks
possibly easier to raise external funds
generally share the workload.
Partial explanation of ONE advantage. [1]
Full explanation of ONE advantage or partial explanation of TWO. [2]
Full explanation of TWO advantages. [3]
23. O/N 11/P13/Q3
Explain why service differentiation is important for businesses in the tertiary sector. [5]
Mark Scheme:
An important part of the marketing of products or services is differentiation – the attempt to create a
significant perception of difference between a product/service of one business and that of its competitors.
This is just as true for tertiary sector services as it is for manufactured products. Services from banks, financial
service companies and retailers are branded and differentiated through distinctive offerings (e.g. superb
customer service standards) – a feature or benefit that separates or differentiates a service from its
competitors. Service differentiation can:
give high levels of market recognition
secure larger market share
produce higher profits
create more of a monopoly position
ring-fence particular services.
Accurate explanation of product/service differentiation. [1]
Clear explanation of product/service differentiation, with some reference to why businesses seek to
differentiate. [2–3]
A developed explanation of why businesses seek to differentiate. [4]
As above, with explicit reference to the tertiary sector. [5]
24. M/J 11/P11/Q1/a
(a) State two objectives of a private sector business. [2]
Mark Scheme:
(a) Two objectives of a private sector business could include:
make a profit
satisfy shareholder demands
grow the business
increase market share • provide employment survive.

ARA
ONE relevant objective stated. [1]
TWO relevant objectives stated. [2]
25. O/N 10/P11/Q3
Explain how a public limited company might finance a large capital investment project. [5]
Mark Scheme:
Explanation will recognise the context of a public limited company and hence the more likely sources of
investment finance, such as: retained profits (instead of dividends) – possible sale of surplus assets – long-
term loans, debentures – sale of shares, venture capital, government grants – depends of course on the
particular position and context of the company.
Limited explanation of potential source(s) of finance for capital expenditure. (1–2)
Explanation of potential source(s) of finance for capital expenditure. (3–4)
Full explanation of potential source(s) of finance in context. (5)
26. O/N 10/P11/Q4/b
(a) Explain two possible disadvantages to a sole trader of changing to a private limited
company. [3]
Mark Scheme:
(a) Disadvantages could include: loss of ownership – no longer owning 100% of the business – possible
loss of control as may not be the majority shareholder – cost of conversion to a Ltd company – may
lose influence on key decisions, e.g. dividend policy, retained profits – accounts need to be produced
and made public – profits now need to be shown.
One accurate disadvantage of a private limited company explained. (1)
Two accurate disadvantages of a private company explained. (2)
Two accurate disadvantages of a private limited company explained with an explicit connection to
the change from a Sole Trader. (3)
27. O/N 09/P12/Q1/a
(a) State two advantages of being a sole trader. [2]
Mark Scheme:
(a) Full control, personal satisfaction, close to customers, personal profit, flexibility of working hours,
easy to set up etc.
One relevant advantage given [1]
Two relevant advantages given [2]
28. O/N 07/P1/Q5
(a) Analyse the benefits which a private limited company might gain by becoming a public
(b) Discuss how different stakeholder groups might view the decision to change from private
Mark Scheme:
(a) Answers should describe the movement from a private limited company to a public limited company
and analyse such benefits as wider/easier access to financial resources (shares to the public), greater
opportunities to grow (economies of scale), greater share of the market etc.
Sound analysis of the potential benefits of the movement from a private limited company to a public
limited company. [7–8]
Some analysis of the benefits of being a public limited company. [5–6]

Sound understanding of the elements of a public limited company. [3–4]
Shows limited awareness of a public limited company. [1–2]
Answers should clearly discuss the stakeholder concept and differentiate between different
stakeholders as they might view this decision to change to a plc, e.g.
(b) Answers should clearly discuss the stakeholder concept and differentiate between different
Shareholders probably want to realise wealth by having quoted shares, but could be concerned
about possible loss of control.
Managers might appreciate publicity and reputation firm could gain, helpful in recruiting, with shares
able to be used as incentive for themselves and other employees. However, they will be aware that
they will be under the spotlight and life might become more stressful.
Employees want security and higher wages; going public may well make the firm more ruthless and
less of a family business. But expansion will bring more opportunities to the ambitious.
Suppliers want security, continuity and higher prices; Plcs should be safer to trade with but could be
more ruthless.
Customers want top quality and lowest prices. A Plc should be more able to provide that.
The Community will be looking for continuity and growth, which hopefully this will provide, but the
risk of takeover and closure (or asset stripping) could worry them.
Evaluative comment which makes reference to the possible balance between benefits and
drawbacks of the decision to change. [11–12]
Sound analysis of the views of different stakeholders (at least 2) of the decision to change. [8–10]
Shows good understanding of different aims and objectives of stakeholder groups. [3–7]
Shows some understanding of the stakeholder concept. [1–2]
29. M/J 07/P1/Q1/a
(a) Explain one objective of a public sector organisation in your country. [2]
Mark Scheme:
(a) Answers could refer to the objective of providing a merit good free at the point of delivery – or
emphasis on social aspects of activity – free from or influenced by profit/commercial considerations.
Some understanding of a public sector organisation objective. [1]
Clear understanding of a public sector organisation objective. [2]
30. M/J 06/P1/Q1
(a) Outline one difference between the public sector and private sector of an economy. [2]
(b) Explain one difference between private and public limited companies. [3]
Mark Scheme:
(a) Public sector central/local govt. controlled, private sector is enterprises/companies.

Partial understanding of each type or full understanding of one only. 1
Full explanation of difference between private and public sector. 2
(b) PLC quoted on stock market, has multiple shareholders and wide access to finance, but must publish
much more detail of accounts.
Some understanding of one relevant point of difference. 1
Partial explanation of one relevant point of difference. 2
Full explanation of one relevant point of difference. 3
31. M/J 06/P1/Q3
Mark Scheme:
Profit maximisation is prime objective of a plc, but other objectives might dominate in short run, e.g. growth,
market share, sales maximisation. Profit enables growth, investment, competing and satisfying employees.
Ultimately plcs have to satisfy shareholders by producing good profits, or they will become unhappy and sell
shares, causing price to drop. So stock market pressure to keep improving profit drives directors of plcs.
Demonstrating some limited knowledge of what profit maximisation is. 1
Understanding of the term but not fully explaining in terms of plc status. 2-3
Good explanation of importance for a plc. 4-5
32. O/N 04/P1/Q1/a
(a) Define the term ‘free market economy’. [2]
Mark Scheme:
(a) Partial understanding of the term. [1]
Full understanding of free market economy. [2]
33. M/J 04/P1/Q1
(b) Explain one disadvantage of being a sole trader. [3]
Mark Scheme:
(a) Partial definition. 1
Full definition of the term. 2
(b) Some awareness of a disadvantage. 1
Partial explanation of an appropriate disadvantage. 2
Full explanation of an appropriate disadvantage. 3
34. O/N 03/P1/Q1
(a) Distinguish between the public sector and private sector of an economy. [2]
(b) Explain why some goods and services are provided by the public sector in your
country. [3]
Mark Scheme:
(a) Public sector is central or local government controlled, private sector is enterprises or companies.
Partial understanding of each type or full understanding of one only 1
Full explanation of difference between private and public sector 2
(b) Where general community benefits but profit motive does not apply, e.g. public goods such as roads,
merit goods such as health or education. Or if government believes in nationalisation, etc.
Some understanding but reason not explained 1
Substantially full but incomplete explanation of importance 2
Full explanation of reasons for government involvement as provider 3
35. O/N 03/P1/Q6/b

(a) Discuss why the owners of a private limited company might wish to convert it into a public
Mark Scheme:
(a) Answers should include factors such as the need for finance and future sources of finance. Increasing
prestige, making loan finance more feasible and share options a possible incentive. Realising wealth
of owners and satisfying ambitions to grow and make company a top operator.
Knowledge and Application
Level Two: Basic awareness of advantages of being public. 4-6 marks
Level One: Simple knowledge of the difference between private and public companies. 1-3 marks
Analysis and Evaluation
Level Two: Good analysis of the finer motives, such as realizing wealth, and some evaluation
of the dangers. 4-6 marks
Level One: Analysis of why owners might want to float, such as financial restrictions of being private.
1-3 marks
36. M/J 03/P1/Q1/a
(a) Distinguish between secondary and tertiary levels of activity. [2]
Mark Scheme:
(a) Partial understanding of each type or full understanding of one only. 1
Full explanation of difference between the two. 2
1.3 Size of Business

1. M/J 19/P13/Q5/a
(a) Analyse the impact of small businesses on the development of a country. [8]
Mark Scheme:
• Improve the standard of living / GDP / tax revenues.
• Small businesses can be critical contributors to the strength of local and national economies.
• They may be significant employers and generate a high percentage of new jobs.
• May stimulate growth and innovation, take risks, explore new ideas.
• May be the building blocks for future large businesses and become significant players in
national and international markets.
• May be an important element in the ‘outsourcing’ systems of larger businesses.
• Small businesses can also bring disadvantages to the development of a country.
• Some candidates may answer the question in terms of advantages and disadvantages. This
is acceptable.
2. O/N 15/P12/Q3
Explain why small businesses are important for many economies. [5]
Mark Scheme:
Small businesses employ in total a significant proportion of the working population in many countries.
They often provide entrepreneurial impetus and give greater consumer choice.
They provide competition for the larger companies.
They often provide specialist goods and services to large/important industries in a country.
They can be flexible and adaptable to the needs of larger businesses.
They may well grow into larger and more efficient businesses.
They can provide more personal services to consumers and enjoy lower average costs.
They contribute to GDP.
Sound explanation of how small businesses have a potential and positive value for an economy and hence
why they can be important for an economy. [4–5]
Limited explanation of the role/value of small businesses. [2–3]
Limited/general reference to role/features of small businesses. [1]
3. O/N 15/P13/Q1
(a) Define the term ‘internal growth’. [2]
(b) Briefly explain two reasons why many businesses set growth as an objective. [3]
Mark Scheme:
(a) Internal growth refers to the expansion of a business by expanding existing operations through
opening new branches, shops or factories – also known as organic growth.
Full definition – sound understanding. [2]
Partial definition – limited understanding. [1]
(b) Business growth may be sought for reasons such as:
increase profits and sales
increase market share – a higher market profile
secure economies of scale
increase power and influence of owners in society
reduce risk of takeover
exploit entrepreneurial ambition and potential
Sound explanation of two reasons. [3]

Sound explanation of one reason or a partial explanation of two. [2]
Partial explanation of one reason or statement of two. [1]
4. O/N 14/P11/Q7/a, M/J 12/P13/Q5/a
(a) Explain the weaknesses of ‘family owned’ businesses. [8]
Mark Scheme:
(a) The inherent strengths of family owned businesses – businesses where the voting majority is in the
hands of the controlling family – are many for example:
family dedicated to business – work hard to build and grow the company and re-invest profits and
there is pride and focus in reputation and quality of product and maintain good relations with
external stakeholders.
But, the weaknesses often outweigh the strengths, weaknesses such as:
complexity of different roles played by family members and governance problems – different
motives and strategies from different family members
too much informality, not enough clear business practices and procedures – with growth may come
significant conflict
neglect of strategic management, succession planning, lack of external management expertise
plus, family owned businesses may have poor cost control, poor cash flow, poor management
means that the majority of family owned businesses are not sustainable • discipline difficulties i.e.
reluctance to discipline or sack family members
family arguments might be brought into the work situation.
Analysis of the weaknesses of family owned businesses. [7–8]
Good explanation of the weaknesses of family owned businesses. [5–6]
Limited explanation of family owned businesses. [3–4]
Little understanding of family owned businesses. [1–2]
5. O/N 12/P11/Q1
(a) Define the term ‘limited liability’. [2]
(b) Briefly explain two advantages (other than limited liability) a private limited company has
over a sole trader. [3]
Mark Scheme:
(a) Limited liability is the situation where the only liability or potential loss that a shareholder has if a
company fails is the amount invested in the company not the total wealth of the shareholder.
a definition that indicates limited understanding [1]
a definition that indicates full understanding. [2]
(b) Advantages could include: separate legal personality of a private limited company, likely continuation
of a company in the event of the death of a shareholder, better able to raise capital through sale of
shares to family, friends, and employees, greater status than an unincorporated business, original
owner may still be able to retain control over the business.
partial explanation of ONE advantage/statement of TWO advantages [1]
sound explanation of ONE or partial explanation of TWO advantages [2]
sound explanation of TWO advantages. [3]
6. M/J 12/P12/Q5/b
(a) Discuss the factors that could influence the success of a small business. [12]
Mark Scheme:
(a) The discussion might initially define small businesses and their characteristics…(small no. of
employees…small turnover…small net profit etc.).
Factors affecting success are many (may be owner, venture or economy specific) may include:
degree of business acumen/expertise/experience – degree of
capitalisation/undercapitalisation…quality of business objectives…expand too fast…quality of basic
business functions and systems, e.g. planning, costing, marketing, product development, poor/good
location, poor/good internal controls (costs and cash flow), level and type of competition, viability of
business model chosen…reward particular and country specific examples.
Evaluative comment on appropriate success factors. [11–12]
Analysis of a range of success factors. [8–10]
Good understanding of small business success factors. [3–7]
Limited understanding of small business success factors. [1–2]
7. M/J 12/P11/Q5/b
(a) Discuss the importance of small businesses to the economy of your country. [12]
Mark Scheme:
(a) The discussion initially may seek to define small businesses, (SMEs) businesses employing less than
20/50 staff (varies between countries) Importance might refer to: the value of small businesses in
providing employment opportunities…in many countries, including developed economies, small
businesses account for a significant % of employees (e.g. in New Zealand 97% of businesses employ
19 or fewer employees)…give opportunities for new entrepreneurs to start up. Governments
provide start up funds and incentives to encourage small businesses to develop and so contribute to
the economy…particularly in the tertiary sector…small businesses considered to be more creative,
innovative, and flexible–staff more motivated. Provide a rich range and variety of products and
services – can become national and international organisations (e.g. software companies starting in
a garage)…stimulate other entrepreneurial activity. May make a particularly important contribution
to the GDP and economy of a country…emphasis by governments of such countries to invest in
these small businesses as well as inviting multi-national companies to come in.
Evaluative comment on the importance of small businesses in an own country context. [11–12]
Analysis of role/importance of small businesses to economies (high mark if context of own country
is contained within sound analysis). [8–10]
Good understanding of the role/importance of small businesses to economies. [3–7]
Shows limited understanding of small businesses. [1–2]
8. M/J 12/P13/Q5/b
(a) Discuss internal growth as a way of expanding a business. [12]
Mark Scheme:
(a) Discussion of expansion through internal growth (rather than external growth actions such as
mergers, vertical and horizontal integration) might include:
deliberate decision not to pursue external growth – avoid risks of external growth such as the
merging of additional companies, culture and work force resistance – retain full management control
through organic growth – retain core values – decide to use own resources and grow incrementally,
may be at a stage of development where external growth is not possible.
Internal growth might include: open more outlets/divisions/branches/ in other towns and cities –
devolve and develop the existing business – grow the customer base – create new products –
increase operational efficiency.
Evaluative discussion of expansion through internal growth. [11–12]
Analysis of why expansion through internal growth is a business option. [8–10]
Shows understanding of expansion through internal growth. [3–7]
Limited discussion of growth and/or internal growth. [1–2]
9. O/N 11/P12/Q4/b
(a) Explain two objectives a small business might have in the first year of trading. [3]
Mark Scheme:
(a) Essentially looking for early business-wide objectives, e.g. survival, break-even, (then make profit),
become environmentally aware, gain market share, establish market reputation, manage cash flow
efficiently, retain staff etc.
Partial explanation of ONE objective. [1]
Sound explanation of ONE objective or partial explanation of TWO. [2]
Sound explanation of TWO objectives. [3]
10. M/J 11/P13/Q5/a
(a) Explain the strengths and weaknesses of small businesses. [8]
Mark Scheme:
(a) Strengths might include:
• offers opportunity to entrepreneurs
• little start-up money may be required
• large percentage of revenue can be converted to profit
• flexible business organisation
• quick response to customer demands
• more personalised approach
• managing the assets may not be too demanding
• internal factors such as good internal communication, likelihood of workers feeling
‘included’ and recognised in a small organisation.
Weaknesses might include:
• lack of capital to expand
• difficult to build a customer base
• diseconomies of small scale
• owners may lack core management skills
• customers may prefer to trade with larger established companies
• difficulty with cash flow
• external competition with large businesses.
Analysis of strengths and weaknesses of small businesses. [7–8]
Good explanation of strengths and weaknesses of small businesses. [5–6]
Explanation of strengths and/or weaknesses of small businesses. [3–4]
Some understanding of features of small businesses. [1–2]
11. M/J 11/P11/Q1/b
(a) Describe two methods for measuring the size of a business. [3]
Mark Scheme:
(a) Two methods of measuring the size of a business could include:
market share
level of sales turnover
number of employees
value of capital employed (cost of replacement)
the value of a business/market capitalisation.
Do NOT accept profit.
Partial description of ONE method OR two or more methods listed/stated. [1]
Sound description of ONE or partial description of TWO methods. [2]
Sound description of TWO methods. [3]
12. O/N 09/P12/Q1/b
(a) Briefly explain two objectives a small business might have, other than profit maximization
[3]
Mark Scheme:
(a) Objectives might include: survival, market share, establish the business, cover costs, work/life
balance, competitive market etc.
Appropriate definition of objectives/or one relevant objective given with weak explanation/or two
objectives simply listed [1]
Sound explanation of one objective/or partial explanation of two relevant objectives [2]
Sound explanation of two relevant objectives [3]
13. O/N 08/P1/Q4/a
(a) State two ways of measuring the size of a business. [2]
Mark Scheme:
(a) Ways of measurement could include: size of labour force, total output, market share, turnover, profit
figure, amount of capital employed, market capitalisation.
One accurate measure stated. [1]
Two accurate measures stated. [2]
14. O/N 05/P1/Q7/b
(a) Discuss whether the government should support small businesses in your country. [12]
Mark Scheme:
(a) Much will depend on competitive environment. Many governments are anxious to attract large
businesses as they create lots of jobs and GDP. Small businesses are often lifeblood of economy and
create jobs and wealth country-wide. They are often more labour-intensive and create more jobs.
Often they need support to develop and grow. This may take form of grants, loan guarantees,
specialist advice, location support, help with training, exporting etc. But government cannot always
afford to give support and many small firms survive successfully without, so financial aid could be
unnecessary and a waste.
Level Two: Understands special support needs of small firms. 3-4 marks
Level One: Some awareness of ways of government support shown. 1-2 marks
Level Two: Evaluates need to strike balance between support for firms and cost of doing so.
5-8 marks
Level One: Analysis of why governments often supports small businesses for good of economy.
1-4 marks
15. O/N 05/P1/Q7/a

(a) Explain the advantages and disadvantages of being a small business in food retailing. [8]
Mark Scheme:
(a) Advantages should include factors such as personal service, high quality and higher prices, the ability
to change course as market changes, closeness to customers. Disadvantages include lack of finance,
inability to gain economies of scale, uncompetitive prices, difficulty in competing with supermarkets.
Much will depend on purchasing habits of customers, wealth of customer base and closeness of
competition. Supermarkets are increasingly going for local outlets.
Level Two: Gives pros and cons successfully of being small. 3-4 marks
Level One: Only one side of question answered or both sides in no depth. 1-2 marks
Level One: Analyses pros/cons in light of food industry demands, referring to competition, customer
base etc., but emphasising threats. 1-4 marks
16. O/N 04/P1/Q3/a
(a) State two different ways in which the size of a business might be measured. [2]
Mark Scheme:
(a) One method given. [1]
Two relevant methods given. [2]
1.4 Business Objectives

1. O/N 18/P12/Q6
Discuss the extent to which the stakeholders of a large clothing retailer might want the business
to become more ethical and socially responsible. [20]
Mark Scheme:
Candidates may well recognise that such a business will have different stakeholders – customers, suppliers,
employees, managers, owners, shareholders, communities, who may well have different and possibly
conflicting objectives / ideals.
• There are opportunities for a business to focus only on making profits and this could lead to
unethical and socially irresponsible behaviour, e.g. exploiting low wage / child labour clothing
production.
• The main objectives of the business may be
– Profit maximisation
– Being socially responsible and ethically minded
– Cost reduction e.g. cheap clothing production
– Short-term profitability
– Long-term sustainability
– Building reputation
– Establishing a competitive advantage through ethics and social responsibility
Evaluative comments might discuss questions such as who the dominant stakeholders are and what the
dominant business objectives are. The answer may well depend on stakeholder perceptions of what is best
for the business / society in short and long term.
Stronger evaluation may mention the influence of social/political pressure for more ethical and socially
responsible business activity, which could give stakeholders little choice in the matter, or the influence of the
business cultures in individual countries, or the stage of economic development in different countries.
2. O/N 18/P11/Q5/b
(a) Discuss why the shareholders of a public limited company (PLC) might disagree with
having corporate social responsibility (CSR) as a business objective. [12]
Mark Scheme:
(a) • The distinction between ownership and control can lead to conflicts between shareholders
and directors about the direction the business should take.
• Shareholders may well prefer measures that aim at short term profits rather than long term
growth.
• Shareholders may well believe that the objective of the business should be to make profits
not to do social good.
• Some stakeholders may say that an awareness of the social consequences of business
activity is enough – there is no need to go as far as CSR.
• The large institutional shareholders may be particularly concerned with short-term profits –
a recognition that there may be shareholders in a business with different motives but the
large shareholders may dominate.
• Lack of understanding by shareholders of longer-term benefit of CSR.
• Stakeholders other than shareholders may prefer CSR as it could result in environmental
preservation, better work practices/pay, higher quality/cheaper products.
Evaluation may contrast the advantages and disadvantages of CSR in the short and long term,
possibly with reference to the different objectives the PLC is aiming to achieve at a particular time or
the type of shareholders they are hoping to attract.
3. M/J 18/P12/Q6
In recent years a significant number of businesses have been accused of being unethical.
Discuss whether senior managers should consider ethics when making business decisions. [20]
Mark Scheme:
• Ethical decision-making – decisions taken with a reference point of morality – the ‘right’ (rather than
‘wrong’) decisions in relation to employees, customers, suppliers, the environment.
• Ethical decisions may increase costs and limit business activities.
• There is increasing scrutiny of business behaviour and activities by outside agencies/pressure groups.
• Senior managers likely to take decisions that can have a significant impact on others (examples –
exploitation, bribery, child labour).
• Senior managers becoming more aware of consequences of unethical decisions – reputational
damage (examples).
• Senior managers may see a competitive advantage in being ethical and stakeholders may have a
greater expectation of ethical behaviour. Its importance may depend on a number of factors:
– Extent of stakeholder pressure.
– Values of senior managers and/or owners.
– What are other businesses doing?
• Senior managers may make a risk assessment of ethical / unethical decisions and will need to take
account of external factors and the unique situations experienced.
Answers might demonstrate evaluation by asking questions such as:
• Does the need to avoid pressure group activity / government action (taxes and grants) put
pressure on the senior manager?
• Also answers may propose that internal concerns about reputation and brand image
suggest that the extra short term costs of becoming more ethical can be outweighed by the
likelihood of future long term benefits.
Please note that an answer may not specifically mention the term senior managers but may well refer
to important business decisions such as relocation, changing suppliers, CSR, supply chains, code of
conduct, brand reputation, purchase of fixed assets, production/output, HRM decision such as the
difficulty /ease of attracting employees to the business. These need to be credited within Levels 3, 4
and 5.
4. M/J 18/P11/Q3
Explain how ethics may influence the objectives of a business. [5]
Mark Scheme:
• The moral principles that guide the way a business behaves – distinguishing between ‘right’ and
‘wrong’ and then making the ‘right’ choice.
• The objectives of a business may include survival, growth, market domination, profit, and the pursuit
of any of these may well involve ethical dilemmas.
Ethics may influence business objectives in the following ways:
• Ethics prevent a business pursuing negative objectives such as profit maximisation at any
cost.
• Prevents a business exploiting workers to maximise profits by the government setting
minimum wage levels.
• Prevents a business exploiting suppliers to maximise profits (preventing late or slow invoice
payments).
• Prevents a business deciding on a low cost location in a country that has few regulations e.g.
child labour, lax pollution laws, poor health and safety, bribery, slavery.
• Encourages CSR.
• Encourages recycling.
• Encourages employee welfare.
• Encourages sustainable production.
5. M/J 18/P11/Q6
‘A business mission statement is only important if it directly affects the strategy and tactics of that
business.’ Discuss this view. [20]
Mark Scheme:
• Mission statements define the core purpose and focus of an organisation and are designed to
motivate all employees.
• Strategy is about the long-term decisions – the focus of senior managers.
• Tactics are short to medium term decisions taken by less senior managers in departments or
divisions.
• The view suggests that some mission statements may be little more than ‘wish’ statements or
statements addressing external stakeholders.
• The view suggests that for a mission statement to be significant/important it must become part of
the operating focus of decisions at strategic and tactical level.
• It must be the reference point for senior managers making strategic decisions and more junior
managers making tactical decisions and affect the motivation, behaviour of all employees at all levels
within the organisation.
• For example, the mission statement may relate to ethical business operations. This must be accepted
at strategic and tactical level as it affects decisions on, say, use of child labour at the strategic level
and compromised customer service levels at the tactical level.
• Room for evaluative comment on the extent to which a mission statement is more than an
‘aspirational wish list’.
6. M/J 18/P13/Q3
Explain why the objectives of a business may change over time. [5]
Mark Scheme:
• Business objectives are the stated measurable targets (tactical, strategic, corporate, departmental)
that move an organisation to achieve its aims and purpose.
• Objectives can include survival, growth, profit maximisation, sale growth, socially responsible
aspirations.
• Changes may take place in response to: –
– Initial objectives achieved (survival).
– Competitive environment changes.
– New leadership and management.
– Technology changes – new production possibilities.
– New opportunities arise – international trade.
– Economic / external situation changes – e.g. recession.
– Unique products are no longer unique.
– Customer demands change.
– Change of ownership.
7. Mar 18/P12/Q6
‘A family retail business should stay small rather than setting growth as an objective’. Do you
agree? Justify your answer. [20]
Mark Scheme:
• A traditional small business usually has five to 25 employees and does $1 million to $5 million in sales.
• Growth objectives are goals to increase the size of the business in the future whether by earnings,
products or locations.
Positive analysis of the statement could include:
• Small businesses are easy to control.
• Profits can be high as overheads tend to be low.
• Strong relationship with customers leads to repeat sales.
• A small business may flourish in a niche that enables them to charge high prices.
• Better working atmosphere as employees know each other.
• Growth requires capital which may not be available.
• Growth requires systems and procedures to be developed.
• Growth will require recruitment and possibly new premises.
• Growth may require management techniques not possessed within the business.
• Staying small is safe as long as there is room in the market and demand remains consistent.
• Small business owners may find the implications of growth daunting.
Negative analysis of the statement could include:
• Staying small is not very challenging for an entrepreneur with strong ambitions.
• May be unable to take advantage of market growth so lose market share to competitors.
• Growth may increase profitability by taking greater advantage of reduced costs through economies
of scale.
• Growth may increase sales revenues by selling a wider range of products or increasing the number
of outlets to cater for increasing demand.
• Growth provides a business with greater focus and can motivate the employees.
• Internal growth can build on existing activities – products, quality, specialisation, concentrating
resources on doing what the firm is already good at so should be supported by customer loyalty.
• External growth can spread the business name quickly to new locations.
Evaluation may recognise that:
• There are different markets and circumstances influencing small business owners and unless
circumstances change there may be no need to consider growth.
• Staying small may be profitable enough for the owner and there may be no desire to grow. A lot may
depend on the family members and who manages the business. Younger family members may have
greater ambitions than older ones.
• A lot may depend on the skills and finance available within the business as well as the potential for
growth in the market. In a recession staying small is advisable but, in a boom, internal growth will be
justified.
8. O/N 17/P12/Q7
(a) Analyse the importance of corporate objectives and departmental objectives to the
success of a business. [8]
(b) Discuss why a bank might change its corporate objectives over time. [12]
Mark Scheme:
(a) Corporate objectives: objectives that transfer mission and aims into clearer guidelines for
management action at the business level.
• ensure that each business unit is compatible with others in the business portfolio.
• concerned with long-term business performance and priorities.
• see that all sections of a business contribute to corporate success.
• set the framework for departmental objectives.
• corporate objectives in a single business company might include growth, profit

maximisation, market share increase.
• they are all overall strategic objectives.
Departmental objectives: each department of a business will be constrained by the corporate
objectives and will set departmental objectives that will specifically support and sustain the
corporate objectives.
• marketing may have a departmental objective to improve sales through more effective sales
promotions.
• finance may have an objective of reducing long-term borrowing by 5% or reducing costs by
10%.
• operations may have an objective of introducing a new product each year.
Each functional department will develop functional level strategies that make processes and the
value chain more efficient through clearly defined objectives and thus support and sustain the
corporate objectives and the success of the business.
(b) • corporate objectives of a bank (if a PLC) might well be to maximise profits; grow; reduce the
competition; develop new products/services; pay employees significant salaries/bonuses;
expand into new markets; manipulate markets and ignore regulations.
• these objectives may change for a number of reasons: new government regulations may
require significant change; to curtail marginal potentially unethical activities so costs may
increase.
• competition might increase from more ethical banks, credit unions; social enterprise.
• may be urged to pay more attention to small and medium enterprises.
• if a government has a shareholding, a bank may be required to withdraw from some highly
profitable activities and pay more taxes or be subject to extra taxes.
• new senior managers may have different views on what the corporate objectives should be.
• the economy may change requiring a bank to play a much more social role in pumping
money into an economy through a more liberal lending policy.
9. O/N 17/P11/Q3
Explain how a business might benefit from acting ethically. [5]
Mark Scheme:
Acting ethically is regarded as doing the ‘right thing’ – taking business decisions against a background of
certain moral principles – morally correct behaviour.
In the short-term there may be a ‘cost’ involved in acting ethically – only doing things in a certain way or not
doing certain things.
In the long-term there could be substantial benefits:
• avoid negative publicity.
• retain customer loyalty – retain/gain sales through high reputational perception.
• attract ethical customers/investors.
• attract staff/retain staff.
• gives a competitive advantage.
• improved brand and business awareness.
10. M/J 17/P11/Q3
Explain why corporate objectives are important to a business. [5]
Mark Scheme:
This question seeks information and comment on objectives at the corporate level and some reference to
importance.
Objectives are important at every level of a business – gives focus and clarity – allows control and review
of operations.7
Corporate objectives – are designed to make specific the aims and mission of a business – they provide a
much clearer guide for management and workforce action throughout a business.
They are set at the highest level of a business – examples include: profit maximisation, market share, growth,
return on investment, cash flow, sales Revenue , shareholder value, corporate image and reputation.
Importance:
• they express the aims, purpose and mission of a business.
• the main, and primary, business objectives.
• set the frameworks and guidelines for all activities in a business.
11. MAR 17/P12/Q3
Explain why a mission statement might be important for a multinational business. [5]
Mark Scheme:
A mission statement is a statement of the core business, purpose and focus of an organisation – designed to
resonate with internal and external stakeholders.
A multinational business might use a mission statement to: communicate the philosophy and goals of the
business to its many employees in different country locations – to direct and motivate these employees – to
provide a reference point for national, corporate, departmental, section, and individual activities.
Externally, the mission statement may well serve to support and communicate the claims, aspirations of the
business – in terms of customer, supplier, community relationships and its treatment of employees in each of
its different locations.
12. MAR 17/P12/Q5/b
(a) Discuss how ethics may influence the decisions of private sector banks. [12]
Mark Scheme:
(a) Ethics is about the morality, rights and wrongs of business decisions as perceived by the stakeholders
of a business.
• Business ethics are concerned with how businesses treat the environment, work with staff
and suppliers to build a responsible company, relate to local communities and produce a
viable, sustainable company and add value socially as well as economically.
• Business ethics is now part of the language of business; customers demand more and
management is often trained to deliver more.
• May mean that a business makes explicit provision for ethical behavior and ethical
performance.
• Might mean additional costs.
• More monitoring and rules of accountability.
• May mean new and different practices.
• May be seen as part of brand building and reputational protection (USP).
• May be a source of additional investment for ethical investors.
• Becoming a necessity rather than a discretionary approach to business decisions.
In relation to private sector banks,
• Willingness of a bank to take risks – the level of discretion/freedom given to employees.
• The extent and significance of internal regulatory protocols that prevent unethical behavior.
• Without ethical frameworks, expectations or codes, banks may engage in unethical
behavior – over- invest – focus on high profit making activities at the expense of core
customer lending activities – engage in exploitative practices with small businesses –
manipulate lending rates – engage in illegal activity.
• Ethical behavior will constrain banks and move them into fair and reasonable behavior and
to adopt internal codes and regulations and so avoid need for external regulations, fines and
even prison sentences.
13. O/N 16/P11/Q1
(b) Briefly explain two limitations of mission statements. [3]
Mark Scheme:
(a) A written statement of the core aims/values/purpose/objectives of a business.
Sound definition (2 marks)
(b) Limitations could include:
Often written in very general / vague terms in order to appeal to internal and external stakeholders
as to have little impact.
Often long and aspirational — a wish list with little operational value.
14. O/N 16/P13/Q5/b
(a) Discuss why senior managers leading large public limited companies might decide not to
have corporate social responsibility (CSR) as a business objective. [12]
Mark Scheme:
(a) Level 4 Effective evaluation of why some PLC senior managers would be against CSR as a
business objective 9-12
Level 3 Limited evaluation of why some PLC senior managers would be against CSR as a business
objective 7-8
Level 2 Analysis and some application of arguments for not having CSR 3-6
Level 1 Understanding of senior managers/CSR/public limited companies 1-2
Some senior managers see CSR (that business should consider the interests of society in its decisions
and activities over and above legal responsibilities) as fundamentally flawed and a dangerous
distraction from profit seeking and shareholder satisfaction.
Companies that simply do all they can to boost profits will end up increasing social welfare. It is
argued that, for example, producing fuel efficient cars is not about increasing the quality of the
environment, but about responding to customer demand for fuel efficient cars. The profit motive
will, therefore, lead to successful environmental situations.
Senior managers should relentlessly pursue profit maximisation — the market response to consumer
demand will maximise consumer satisfaction.
More important to make money than to give it away.
It is irresponsible to focus on wider community if the business is managed/ led successfully.
If the aim/objective is 'to do good' companies may well fail.
The movement towards CSR is seen to be in direct opposition to the best interests of a business
organisation.
Companies who sacrifice profit for the common good are imposing a tax on shareholders and other
company stakeholders.
An awareness of social consequences of business activity is sufficient — CSR is going too far.
So some senior managers may see CSR simply as a financial calculation for the business and are not
interested in CSR for PR purposes.
This question is NOT a general question on CSR — rather, it is a question about why some PLC senior
managers might have significant concerns about the impact of CSR on the bottom line and might
take the view that the business of business is business not social welfare'.
Often seen as a PR exercise — so little motivational impact (other than negative cynicism!).
If not supported by management has little positive impact Seen as being distant from operational
reality.
Two limitations soundly explained (3 marks)
One limitation soundly explained or two partially explained (2 marks)
One limitation partially explained or a list of two (1 mark)
15. M/J 16/P12/Q7
(a) Analyse the importance to a large business of setting corporate objectives. [8]
(b) Discuss how a large food retailer, with many shops, could effectively communicate
corporate objectives to its workforce. [12]
Mark Scheme:
(a) Level 4 Good analysis of the importance of large business corporate objectives 7-8
Level 3 Some analysis of the importance of large business corporate objectives 5-6
Level 2 Some explanation/application of corporate objectives to a business 3-4
Level 1 Understanding of corporate objectives 1-2
These specific organisation objectives become part of senior level management strategies.
Set the context for divisional/departmental objectives and effective plans of action can be
developed.
Ensures that the business is focused and does not drift – clear corporate objectives given such as
growth, profit/sales maximisation.
Present a clear set of guidelines and parameters for middle, junior management actions and
strategies.
Without these clear corporate objectives a business can drift and cease to compete and flourish.
Give meaning and purpose for all engaged in the business.
(b) Level 4 Effective evaluation of how corporate objectives could be communicated in context
9-12
Level 3 Limited evaluation of how corporate objectives could be communicated in context
7-8
Level 2 Analysis and some application of how corporate objectives could be communicated in
context 3-6
Level 1 Understanding of internal business communication 1-2
Strong answers will recognise the particular communication challenge to reach all the retail outlets
in different location areas – senior management visits and presentations – regional/local managers
invited into HQ?
Specific communication methods could be used:
‘State of nation’ address by CEO and/or senior managers
Senior managers to middle managers to junior managers
Team meeting/briefing
Away days
Training and development days
Company newsletters/digital platforms/company website
Internet/social media.
Methods may not be as important or effective as developing participation and engagement
opportunities for employees – to educate, inform and inspire employees.
Develop an open, sharing, two-way communication culture in the business – train and retrain
managers to share information and practise a management style that is supportive of staff
engagement approaches.
Effectiveness depends on the extent to which open communication is part of the bloodstream/DNA
of the organisation and its managers and that there is full recognition of the need for consistency of
approach over all this disparate business.
16. M/J 16/P11/Q6
Because there is conflict between profit and corporate social responsibility (CSR), private sector
businesses should not have CSR as an objective.’
Do you agree? Justify your view. [20]
Mark Scheme:
Level 5 Effective evaluation of the statement on CSR as a business objective – reference should be made to
agree/not agree with justification. [17–20]
Level 4 Good analysis and limited evaluation of the statement on CSR as a business objective – (some
reference to agree/not agree with some justification to reach 15–16 mark level)
Level 3 Analysis of the statement on CSR as a business objective [11–12]
Level 2 Limited analysis with application of CSR and its role in business activity [5–10]
Level 1 Understanding of CSR [1–4]
Level 0 No creditable content [0]
CSR is the concept that business should consider the interests of society in decisions and activities over and
above legal requirements.
May include paying higher wages, improving working conditions, improving safety standards, cutting waste
and pollution, support worker security.
May well mean a sacrifice of profit levels, increased costs.
May well lead to modification of objectives, such as aggressive expansion, tax avoidance, excessive staff
bonuses.
Can lead to shareholder conflict.
Some customers want low prices – not worried ‘how’ a product is made.
So should not the ‘business of business be business’, not wishy-washy social objectives?
Positive aspects of CSR – more socially aware customers purchase, more employee loyalty, more good
reputational publicity – can lead to higher long-term profit levels.
Perceptive answers will recognise the potential conflict between CSR and profit – but will also recognise the
simplicity of the assertion in the question.
17. O/N 15/P12/Q7/a
(a) Explain how the objectives of a social enterprise might differ from those of other private
sector businesses. [8]
Mark Scheme:
(a) Relevant points may include:
A social enterprise is a business with mainly social objectives and re-invests profits into benefitting
society rather than maximising returns to owners.
Profit is still an objective and social enterprises compete with other businesses in the market /
industry.
Business principles are used to achieve social objectives and they seek to make profits in a socially
responsible way.
Objectives are Economic (make profits in sociably responsible ways), Social (provide local jobs and/or
support local disadvantaged groups) and Environmental (protect the environment, do business in an
environmentally sustainable way) – triple bottom line… distinctively different from sole traders,
partnerships, plcs not set up as social enterprises.
Analysis of how social enterprise objectives are different from other private sector businesses. [7–8]
Good explanation of how social enterprise objectives are different from other private sector
businesses. [5–6]
Limited explanation of how social enterprise objectives are different from other private sector
businesses. [3–4]
Little understanding of a social enterprise. [1–2]
18. O/N 15/P11/Q7
(a) Explain why a business might not behave ethically. [8]
(b) Discuss, with examples, how unethical business behaviour could damage the reputation
of a company. [12]
Mark Scheme:
(a) Ethics is concerned with moral guidelines. A business may decide to act in compliance with the law
but go no further.
it may decide that its business is the business of making profits, producing goods and services, and
employing people – not ethical/social responsibility activities a business may decide it cannot afford
to be ethical the aim is survival, growth and profitability – if that requires compromises on employee
terms and conditions, or treatment of suppliers for example, then so be it!
a low priority may be given to any objective or activity that is not directly contributing to the bottom
line the pressure to establish more positive ethical standards may be relatively weak in the business
(by Government or pressure groups)
a business may be a business in an ethically under-developed industry or country with few ethical
objectives or aspirations
Analysis of why a business might not behave ethically. [7–8]
Good explanation of why a business might not behave ethically. [5–6]
Limited explanation of why a business might not behave ethically. [3–4]
Little understanding of business objectives/activities and/or ethics. [1–2]
(b) Candidates can either give theoretical examples of unethical business practices and/or provide actual
examples of companies suffering reputational damage due to unethical or alleged unethical conduct
(e.g. Enron, News of the World, or own country examples).
Candidates may well discuss different types of unethical business behaviour such as:
– poor working conditions for employees or suppliers
– dishonest sales techniques
– environmentally unfriendly production methods
– bribery and corrupt operating policies
– misleading financial reports
Such unethical business practices could lead to:
– loss of trust in the company by customers and employees
– legal action may result, leading to compensation and damage to reputation
– poor publicity affects market standing
– the brand is tarnished
– investors and potential investors respond negatively

– the value of the company can seriously deteriorate leading to liquidation, merger or takeover
• Some evaluative comment on how unethical business behaviour could damage the
reputation of a company. [9–12]
• Analysis of how unethical business behaviour could damage the reputation of a company.
[7–8]
• Discussion of how unethical business behaviour could damage the reputation of a company.
[3–6]
• Limited understanding of unethical business behaviour. [1–2]
19. M/J 15/P12/Q1/b
(a) Briefly explain two ways in which the objectives of a social enterprise might be similar to
Mark Scheme:
(a) Although a social enterprise is a business that has specific social objectives and is not solely
in pursuit of profit, it still shares some common features with other types of businesses such
as:
– It is a business that seeks to make a surplus/profit
– It is concerned with being efficient and effective.
– It will likely face competition from other businesses in the same market or industry.
– It uses business principles and processes to achieve its objectives.
– It will have concerns for its workforce
– It will aim to deliver quality goods and services.
– It is of course committed to social/environmental responsibility as can be other businesses.
• Sound explanation of TWO similarities. [3]
• Sound explanation of ONE similarity or partial explanation of TWO. [2]
• Partial explanation of ONE similarity or simple statement of TWO. [1]
20. O/N 14/P12/Q3
Explain why many businesses have corporate responsibility as an objective. [5]
Mark Scheme:
Corporate responsibility is a concept involving a business concern, not just for the bottom line but for the
interests of society. Businesses consider the impact of business decisions and activities on customers,
employees, communities and the environment.
• Concern for more than the bottom line.
• More awareness of the negative effects of damaging business activities.
• More legislation has developed to constrain business.
• Pressure groups can draw attention to poor business decisions and activities and
damagereputations.
• Consumers tend to react positively to businesses that act in a socially responsible way.
• Corporate responsibility can produce competitive advantage – a U.S.P.
• Not all businesses are convinced and argue that the business of business is business and let others
pursue social issues.
A very limited attempt to define and discuss corporate responsibility. [1]
Some reasoned but limited explanation of why corporate responsibility is viewed as an important
business objective. [2–3]
Sound explanation of why businesses pursue corporate responsibility objectives alongside ‘bottom line’
objectives. [4–5]
21. O/N 14/P11/Q3

Explain the importance of a mission statement to the employees of a public limited company.
[5]
Mark Scheme:
A mission statement is a statement of the core business, purpose and focus of an organisation – designed to
resonate with internal and external stakeholders.
Mission statements are considered to be important for employees of a business in that it provides the context
for worker activity. The goals and philosophies in a mission statement may serve to direct and motivate a
workforce.
Mission statements may well reflect the beliefs and vision of senior management and is designed to inspire
employees and support distinctive organisational cultures.
P.L.Cs tend to be large and therefore need to make their overall aims and values clear to employees (could
be a very large number of employees) and the mission statement provides an important reference point for
them.
Can provide a sense of purpose in large businesses (P.L.Cs) – e.g. sense of shared values.
Limited reference to mission statements and/or stakeholders. [1]
Limited explanation of the importance of a mission statement to employees. [2–3]
Sound explanation of the importance of a mission statement to employees.
Reference to a P.L.C required for 5 marks. [4–5]
N.B. This question is about employees in a P.L.C. Answers that are specific about the advantages of a mission
statement to a P.L.C. should be rewarded accordingly.
22. O/N 14/P11/Q7/b
(a) Discuss why some businesses do not set a growth objective. [12]
Mark Scheme:
(a) It is often assumed that one of the main objectives of a business is to grow – this may not be the case.
There may be reasons why a business cannot grow and reasons why a business does not want to
grow:
• Businesses may not have the option to set growth as an objective – they may operate in a
niche market.
• Limited capital may prevent growth.
• Businesses may be family businesses with neither the ambition nor the capacity to grow.
• Businesses do not have to grow to become (more) successful.
•T hey can exploit their advantages – a small business has manoeuvrability – it can act and react
fast.
• They can grow through outsourcing or joint ventures.
• Businesses can give customers the satisfaction of personal interacting and thus retain their
competitive advantage.
• Non-pecuniary benefits – being one’s own boss, flexibility are first order issues for small
business owners.
• Businesses often content to exploit entrepreneurial skills and competences in a selected
restricted area of business.
• The nature and composition of many businesses (e.g., small shops, solicitors, accountants,
restaurants, small-scale manufacturing, means that they do not seek growth.
• Businesses survive and succeed by remaining small and supply to large businesses.
• Might be new/small business; growth is not yet an appropriate aim.
• Shareholders might not want a company to grow.
Evaluative comment(s) on the reasons for businesses not setting growth as an objective. [9–12]
Analysis of reasons for businesses not setting growth as an objective. [7–8]

Discussion of reasons for businesses not setting growth as an objective. [3–6]
Limited discussion of growth as a business objective. [1–2]
23. O/N 14/P13/Q7/b
(a) Discuss how ethics may influence the activities of a business. [12]
Mark Scheme:
(a) Business ethics are concerned with how businesses treat the environment, work with staff and
suppliers to build a responsible company, relate to local communities and produce a viable,
sustainable company and adds value socially as well as economically.
– Business ethics now part of the language of business, customers demand more and
management is trained to deliver more.
– May mean that a business makes explicit provision for ethical behaviour and ethical
performance.
– Might mean additional costs.
– More monitoring (e.g. of suppliers).
– May mean new and different practices, e.g. waste disposal – treatment of additional/
different shareholders.
– May be seen as part of brand building and reputational protection (USP).
– May be a source of additional investment for ethical investors.
– So positive and negative implications – becoming a necessity rather than a
discretionary approach to business decisions.
• Evaluative comment on the influence of ethics on business activity. [9–12]
• Analysis of the influence of ethics on business activity. [7–8]
• Discussion of the influence of ethics on business activity. [3–6]
• Limited understanding of ethics. [1–2]
24. M/J 14/P12/Q3
Explain why the objectives of a business could change over time. [5]
Mark Scheme:
A business may change its objectives over time for a number of reasons:
– Business objectives are the stated, measurable targets of how to achieve aims and a sense of purpose.
– Business objectives may include: survival, growth, profit, maximisation, sales growth, ethical and socially
responsible objectives.
–Business objectives may change for several reasons, including:
◦ Initial objectives achieved (e.g. survival).
◦ competitive environment changes.
◦ technology might change product design.
◦ new management and leadership.
◦ new opportunities arise.
◦ internal/external growth may lead to a revision of mission/purpose and objectives.
◦ economic recession – external constraints.
◦ becomes more ethical.
• Limited reference to business objective(s) or reason(s) for change. [1]
• Limited explanation of why business objective(s) might change over time (limited
examples). [2–3]
• Sound explanation of why business objectives might change over time (well explained
reason(s)/example(s) clearly related to the issue of time). [4–5]
25. M/J 14/P13/Q6
Discuss the advantages and drawbacks for a business of setting corporate responsibility
objectives. [20]
Mark Scheme:
Corporate responsibility is said to operate when a company decides to go beyond normal business / market
principles and creates wealth in ways that avoid harm to, or protect, or enhance social assets. There is
recognition that there is a multiplicity of stakeholders not just shareholders. Social and environmental
concerns and objectives are integrated with business concerns and objectives.
Advantages are said to be:
– Companies exercise their moral duty to promote social justice.
– It is good business practice.
– Such approaches can become powerful competitive advantages.
– It encourages greater loyalty from customers.
– It enhances the reputation of the business.
– It affects the bottom line-increases profitability.
– Contributes to company and environmental sustainability.
– Companies have a duty to correct any adverse social impacts caused.
Drawbacks are said to be:
– Costs are imposed that make businesses less efficient and this will subtract from overall social
welfare.
– It is unfair to shareholders as profits that belong to them are diverted to social projects.
– The market is likely to allocate resources more efficiently than political pressures – ‘the business of
business’ should be business and the making of profits.
– Accountability should be only to shareholders.
– Customers will have to pay higher prices.
– Leads to lack of business focus and is often done for negative reasons as a defensive measure rather
than for positive reasons.
• Evaluative discussion on advantages and drawbacks of setting corporate responsibility objectives.
[17–20]
• Analysis of advantages and drawbacks of setting corporate responsibility objectives [13 – 16]
• Good discussion of advantages and drawbacks of setting corporate responsibility objectives. [11 – 12]
• Discussion of advantages and/or drawbacks of setting corporate responsibility objectives. [5 – 10]
• Limited understanding of corporate responsibility / objectives. [1 – 4]
26. M/J 13/P12/Q3
Explain how ethics could influence the objectives and activities of a private sector business.
[5]
Mark Scheme:
The explanation will likely include a definition of ethics in business: ‘the moral guidelines that determines
business decision-making’ and may refer to the objectives a private sector business might seek to achieve,
e.g. profit maximisation, market share, growth, maximising short-term sales revenue, maximising
shareholder value.
The explanation of the influence of ethics on business objectives and activities might include:
– stop questionable business activities such as taking/giving bribes in order to secure sales/location.
– engage in less polluting production processes.
– pursue social responsibility rather than just profit.

– stop exploiting workers/suppliers.
– extra focus/emphasis on safety issues.
– amending advertising/marketing in pursuit of higher ethical standards.
– stop price fixing, collusion with competitors.
– costs money/reduces profits in the short term.
These are just a few positive and negative implications for a business in the pursuit of a more ethical approach.
Limited reference to either ethics or business objectives. [1]
General explanation of link between ethics and business objectives/activities. [2–3]
Sound explanation with good examples of the influence of ethics on business objectives and/or activities.
[4–5]
27. M/J 13/P11/Q7/b
(a) Discuss the view that the only purpose of private sector businesses is to make profit, not
to pursue corporate responsibility objectives. [12]
Mark Scheme:
(a) The view that business should focus solely on making profit and not be diverted into corporate
(social) responsibility objectives might comment on the following:
– More profit will allow a ‘trickle down’ effect and supply the resources to deal with social
issues.
– Entrepreneurs and managers should maintain a clear focus on ‘bottom line’ issues – play to
their strengths.
– Markets and prices are distorted – let businesses and markets do what they do best.
– Alternatively it is argued that the social cost of profit focus alone is too high.
– It is possible and necessary to combine profit pursuit with socially responsible business
practices.
– It is vital to continually assess the impact of business activity on the environment and to
require more responsible action.
– Corporate social responsibility is often now seen as an essential part of reputation
management and can act as a competitive advantage.
Some evaluative comment on the relative significance of profit maximization and corporate
responsibility [9–12]
Analysis of the assertion regarding profit and corporate responsibility. [7–8]
Some discussion of the assertion regarding profit and corporate responsibility. [3–6]
Limited understanding of the issues involved with corporate responsibility and profit making. [1–2]
28. M/J 13/P11/Q5/a
(a) Explain why the marketing objectives of a business need to be closely linked to its
corporate objectives. [8]
Mark Scheme:
(a) A close alignment is vital as:
– Corporate objectives such as profit maximisation, growth, market share, CSR, survival,
provide a clear guide for business action and strategy.
– The marketing objectives and strategy are designed to support and achieve the corporate
objectives.
– A business in pursuit of short term profit targets will require sales to be maximised at highest
prices possible.
– A business in pursuit of longer-term profit objectives may adopt a ‘societal marketing’

approach to incorporate CSR.
– So marketing objectives need to fit with overall aims and mission of a business.
Analysis of the link between marketing objectives and corporate objectives. [7–8]
Good explanation of the link between marketing objectives and corporate objectives. [5–6]
Limited explanation of marketing objectives and corporate objectives. [3–4]
Little understanding of marketing objectives and/or corporate objectives. [1–2]
29. M/J 13/P11/Q2
(a) State two aims of a ‘mission statement’. [2]
(b) Briefly explain how a ‘mission statement’ might be effectively communicated to the
stakeholders of a business. [3]
Mark Scheme:
(a) A ‘mission statement’ is defined as a statement of what a business stands for – its core
purpose and focus. The aims of a mission statement include:
– Give/state the central purpose of a business in a single statement.
– To motivate employees.
– Stimulate interest by external interested parties.
– A context for a corporate culture.
– Provides guiding principles for business activity.
• One relevant aim stated. [1]
• Two relevant aims stated. [2]
(b) Communication options might include:
– Publish in published company accounts and in communications to shareholders.
– Place in business and strategic business plans.
– Publish in company websites.
– Use internal newsletters and magazines.
– Use advertising and marketing literature.
– Staff training/appraisal.
• Limited reference to communication and mission statements. [1]
• Sound but limited explanation of communication options. [2]
• Sound and detailed explanation of communication options. [3]
30. O/N 12/P13/Q7/a
(a) Explain the link between marketing objectives and corporate objectives. [8]
Mark Scheme:
(a) Corporate objectives provide the context and provide the strategic vision and purpose for marketing
planning and the setting of marketing objectives. Corporate objectives are determined by senior
managers and reflect the mission statement of the organisation and are communicated to all
departments. The marketing department set objectives that help the business achieve its overall
corporate objectives. If the corporate objective is to maximize profit then marketing objectives may
well focus on maximum sales at highest price possible.
If corporate is focused on social responsibility as well as profit there may well be a social marketing
approach. If a business wishes to expand internationally then marketing objectives will be different
to those supporting a consolidation in the domestic market. If the corporate objective is to grow the
business then supportive marketing objectives could include: increase market share, gain market
leadership, rebrand a product, develop new markets.
Marketing objectives must above all be based on company financial objectives.
• analysis of the link between corporate and marketing objectives [7–8]

• good explanation of the link between corporate and marketing objectives [5–6]
• limited explanation of the link between corporate and marketing objectives [3–4]
• little understanding of corporate/marketing objectives. [1–2]
31. M/J 12/P13/Q4
(b) Briefly explain two benefits of setting corporate objectives. [3]
Mark Scheme:
(a) A definition might include – a brief outline of the general purpose of a business – a statement of
business objectives and values – a statement to provide direction for a business and its stakeholders
and to brand a business in the eyes of the external environment.
Partial definition given. [1]
Full definition given. [2]
(b) Corporate objectives are aligned to the mission statement but expressed in terms that provide a
much clearer guide for management and worker action. They focus on specific outcomes and targets
– e.g. profit maximisation, growth, market share, survival. Thus benefits may include: give a specific
context for operational decisions, turn mission statements into achievable and measurable
objectives, give detailed expression to the mission statement of a business, give a clear guide for
management activity and strategy, give direction for the setting of departmental/business unit
targets.
Partial explanation of ONE benefit or states TWO. [1]
Sound explanation of ONE benefit or partial explanation of TWO. [2]
Sound explanation of TWO benefits. [3]
32. O/N 11/P12/Q4
(a) Define the term ‘objective’ as used by a business. [2]
(b) Explain two objectives a small business might have in the first year of trading. [3]
Mark Scheme:
(a) Business objectives defined as goals/targets that a business sets, such as profitability, sales growth,
return on investment, which form the foundation on which strategic and operational policies are
based – the means to achieving business purpose and organisational goals.
Definition indicates partial understanding. [1]
Definition indicates full understanding. [2]
(b) Essentially looking for early business-wide objectives, e.g. survival, break-even, (then make profit),
become environmentally aware, gain market share, establish market reputation, manage cash flow
efficiently, retain staff etc.
Partial explanation of ONE objective. [1]
Sound explanation of ONE objective or partial explanation of TWO. [2]
Sound explanation of TWO objectives. [3]
33. O/N 11/P12/Q6
Discuss how the ethical decisions of a large clothing retailer might help or hinder its business
performance. [20]
Mark Scheme:
Answers might initially define ethical business decisions – ‘right and proper’ decisions in a business context.
There may well be moral judgements to be made and moral dilemmas to face in the retail clothing context.
Key issues are the sourcing of raw materials and the production process in distant lands.
The advantages of an ethical stance include:

• reputation
• marketing and publicity benefits of establishing and communicating the high moral stance taken
• competitive advantage perhaps gained
• impact on the internal culture of the retailer encouraging pride in the company.
The disadvantages of an ethical stance may include:
• costs may increase, a potential disadvantage compared with competitors
• reduced opportunity of overseas outsourcing
• more close control of suppliers required but is such control possible anyway?
Question gives opportunity to balance out both sides of the debate: ‘ethical or not?’ or ‘what degree of ethical
behaviour?’
Evaluative comment on the ethical choices and consequences for a large clothing retailer facing ethical
dilemmas and problems. [17–20]
Analysis of the pros and cons of deciding to be an ethical business in the context of clothing retail. [14–16]
Good understanding of the pros and cons of ethical decision-making. [11–13]
Some understanding of the pros and/or cons of taking ethical business decisions. [5–10]
Very limited understanding of the impact of ethical decisions. [1–4]
34. O/N 10/P12/Q3
Explain the importance of the profit maximisation objective to a business. [5]
Mark Scheme:
Explanation could refer to profit maximisation being a prime objective of a business – it supports growth,
investment, stakeholder satisfaction – shareholders are a key stakeholder driving the share price and
confidence in the business. Answers might well also recognise that profit
maximisation is not always the only or most important objective of a business. E.g. for a small business market
share is more important – survival in a highly competitive market. Some answers might focus on the specifics
of profit maximisation (e.g. pricing policy, profit calculations).
• Some attempt made to discuss the issue of profit maximisation. (1)
• General discussion of profit maximisation in a business – role and result. (2–3)
• Sound explanation of the importance of profit maximisation for a business (possibly with some
reference to alternative objectives). (4–5)
35. O/N 10/P11/Q6
Discuss the benefits to a business of setting ethical objectives. [20]
Mark Scheme:
Discussion could include a definition of ethical objectives – ‘right and proper’ approach to business decisions
and actions – with examples in relation to pollution, treatment of staff, suppliers, environmental issues and
the potential impact of distinctive values and beliefs of a company on its actions.
Potential impact of ethical objectives and behaviour on securing greater market share/
profitability/image/reputation might include: marketing and publicity benefits of the perception of
being ethical – high reputation say for treating an international supplier fairly and ensuring ethical standards
by that supplier – customer perception nationally and internationally – unique selling point (USP) all help to
enhance market share. (Some may point at the potential extra costs and the need to balance costs and
benefits of ethical objective-setting.)
• Evaluative comment on the potential impact of ethical objectives on perceived performance and
activity of a business. (17–20)
• Analysis of the potential value of setting ethical objectives. (14–16)
• Good understanding of the potential value of setting ethical objectives. (11–13)
• Some understanding of the potential value of ethical objectives. (5–10)

• Shows limited understanding of ethical objectives. (1–4)
36. M/J 10/P12/Q6
Discuss how the objectives of stakeholder groups in a profitable business might be in
conflict. [20]
Mark Scheme:
Discussion might initially define stakeholders – those influenced by or influencing an organization and its
decisions. The essence of the scenario is a successful business. Stakeholders might be in conflict in any
business – successful or not – e.g. shareholders’ interests at the expense of other stakeholders. In this
example there may be specific conflicts of interest e.g. – shareholders want high dividends and not long term
investment – managers and workers want immediate salary increases (versus long term security) –
consumers want lower prices (vs innovation and high quality) – environment groups want more investment
in the reduction of waste and pollution, etc.
A range of potential conflicts exist with regard to the distribution of profits. The relative power and influence
of stakeholders is important – and more stakeholders might be in agreement than in conflict.
- Evaluative comment that recognises the significance of a profitable business in creating conflict
and/or comments on the power/influence of respective stakeholders. [17–20]
- Analysis of different stakeholder group objectives and expectations in a business. [14–16]
- Good understanding of stakeholder conflict possibilities. [11–13]
- Shows good understanding of stakeholder groups and their objectives in a business. [5–10]
- Shows some understanding of stakeholder groups and their objectives. [0–4]
37. M/J 10/P11/Q3
Explain why it is important for a business to have clear objectives. [5]
Mark Scheme:
Well-defined objectives help a business to be clear about what it wants to achieve – gives a sense of direction
– provides a measure of how the business performance matches its achievement aims – reference may
be made to specific objectives, e.g. survival, growth, market penetration, profitability etc.
Some understanding of business objectives. (1)
Sound understanding of business objectives with specific examples and possibly implicit reference to
‘importance’. (2–4)
As above, with explicit reference to the ‘importance’ of business objectives. (5)
38. M/J 10/P11/Q6
Discuss how the activities of a business might be constrained by ethical issues. [20]
Mark Scheme:
Answers could refer to the increasing requirement for businesses to take into account ethical issues.
Reference could be made to general business ethics such as the philosophy of a business (shareholder v
stakeholder) or corporate social responsibility or to specific business ethics such as: accounting information
– creative accounting, insider trading; HRM – treatment of employees; sales and marketing – price fixing –
disinformation; production – pollution and carbon emission; intellectual property – patent infringement;
international use of child labour etc.
Some evaluative comment, e.g. a recognition that ethical business activity might not be a constraint but
rather a source of competitive advantage. (17–20)
Analysis of ethical issues and business activities (with examples of contraints). (14–16)
Good understanding of ethical issues in business activity. (11–13)
Descriptive comment on ethical issues and business activities. (5–10)

Limited understanding of ethics and implication for business activities. (1–4)
39. O/N 09/P12/Q1/b
[3]
Mark Scheme:
(a) Objectives might include: survival, market share, establish the business, cover costs, work/life
balance, competitive market etc.
Appropriate definition of objectives/or one relevant objective given with weak explanation/or two
objectives simply listed [1]
Sound explanation of one objective/or partial explanation of two relevant objectives [2]
Sound explanation of two relevant objectives [3]
40. O/N 08/P1/Q4/b
(a) Briefly explain why growth may not be the most important objective for a business. [3]
Mark Scheme:
(a) Explanation could indicate that companies have a number of different objectives to pursue and not
all objectives are appropriate for all firms – include market share, maximise profits, market
leadership, diversification, retrenchment, survival, growth – it may well depend on the size of a
business and the relative strength of different stakeholders. Growth may be an important objective
– and many benefits – but internal and external difficulties may prohibit growth – long term vs short
term objectives – age of business etc.
Limited discussion of business objectives/or growth. [1]
Explanation of growth as one among other objectives. [2]
Explanation that explicitly indicates why growth may not be the most important objective. [3]
41. M/J 08/P1/Q5/b
Discuss how the objectives of a manufacturing business might be affected by ethical
issues. [12]
Mark Scheme:
(a) [Increasingly businesses are taking into account social/ethical issues and recognizing responsibilities
to internal and external stakeholders – this may be on a voluntary basis or required by governments.
Examples of production activity (pollution), ethical trading locally and globally etc., raise issues of
potential conflicts with business objectives of profitability and return on investment.]
Evaluative comment, e.g. recognition of the potential conflict between say social responsibility and
economic performance: (11–12)
Sound analysis of ethical issues and business objectives (reference to context of manufacturing
awarded at the top of level) (8–10)
Shows awareness of ethical issues with implicit reference to business objectives: (3–7)
Limited attempt to define ethical issues (must be accurate) or understanding of objectives of
business: (1–2)
42. M/J 08/P1/Q1
(a) State two objectives a business might set in the short run. [2]
(b) Briefly explain the importance to a business of setting objectives. [3]
Mark Scheme:
(a) One objective stated (1)
Two objectives stated [e.g. survival, profitability, market share] (2)

(b) Partial explanation of setting objectives (1)
Sound explanation of setting objectives (2)
Full explanation, with reference to the importance of setting objectives (3)
[e.g. give direction/focus, motivate staff, assess performance, identify problems]
43. M/J 06/P1/Q3
Mark Scheme:
Profit maximisation is prime objective of a plc, but other objectives might dominate in short run, e.g. growth,
market share, sales maximisation. Profit enables growth, investment, competing and satisfying employees.
Ultimately plcs have to satisfy shareholders by producing good profits, or they will become unhappy and sell
shares, causing price to drop. So stock market pressure to keep improving profit drives directors of plcs.
Demonstrating some limited knowledge of what profit maximisation is. 1
Understanding of the term but not fully explaining in terms of plc status. 2-3
Good explanation of importance for a plc. 4-5
44. O/N 05/P1/Q2
Explain how a manufacturing business might be affected by ethical issues. [5]
Mark Scheme:
Ethical issues are ones involving moral issues which are not illegal but can impinge on firms' activity. Include
factors such as environmental factors – manufacturer might be polluting – good practice in the treatment of
employees (eg redundancy or outsourcing of jobs), healthy living issues (eg soft drinks, fast food, tobacco or
alcohol). Can be opportunity for firms to produce ethical products, eg fair trade goods.
Basic explanation of ethical issues 1
Understanding of some of the implications for a manufacturer 2-3
Substantially full appreciation of factors, including ways to overcome consumer resistance or exploit
opportunity. 4-5
45. M/J 05/P1/Q5/a
(a) Explain how the objectives of a business may change as it grows. [8]
Mark Scheme:
(a) Start-ups have survival as first objective, which might recur in tough times or under takeover threat.
Expansion might be goal, with turnover, market share, size the key, by diversification, or at other
times focusing on key capabilities. Profit maximization comes later, especially if a company has gone
public, but growth may still be short term objective at times.
Level Two: Outlines objectives in context of growth. 3-4 marks
Level One: Just gives different objectives without relating to growth. 1-2 marks
Level One: Explains how growth changes objectives. 1-4 marks
1.5 Stakeholders in a Business

1. M/J 19/P12/Q3
Explain how the interests of two stakeholder groups could affect the decisions of a business. [5]
Mark Scheme:
• Define stakeholders – people or groups who have an interest in / relationship with a business.
• Different stakeholders in a typical business – employees – management – shareholders – customers
– suppliers – local economy – local / national government – pressure groups.
• Business decisions of interest to stakeholders include: profit distribution – expansion – diversification
– supplier policy – degree of social responsibility – operating methods – remuneration and motivating
policies.
• Different stakeholders will have views on such business decisions that may lead to conflict among
the stakeholders or between some stakeholders, e.g. shareholders vs. employees with regard to
profit distribution – so decisions could be changed or overruled or supported with or without conflict.
Effective explanation of two stakeholder groups and how their interests could affect the decisions of a
business. (4–5 marks)
Explanation of two stakeholder groups and how their interests could affect a business. (3 marks)
Explanation of one stakeholder group and how their interests could affect a business. (2 marks)
Descriptive information about stakeholders / business decisions. (1 mark)
2. M/J 19/P13/Q5/b
(a) Discuss the view that a public limited company should prioritise the aims of its
shareholders rather than those of other stakeholder groups. [12]
Mark Scheme:
• A discussion of shareholders / stakeholders, duties, responsibilities, rights, contributions.
• Discussion as to whether some / any one stakeholder might merit favourable treatment
(shareholders).
• How equal should stakeholders be? Corporate governance.
• Who are the biggest risk-takers?
• Are there different kinds of shareholders (big and small).
• Examples of recent / current cases of stakeholder / shareholder benefits and losses e.g. BHS
and Sports Direct.
• Should plc’s address all stakeholder needs?
• Answers may well give an evaluative conclusion which addresses the question as to whether
shareholders should be prioritised and where.
• With reference to previous comment and analysis candidates may express a view / make a
judgement.
3. MAR 19/P12/Q3
Explain why there might be conflict between two stakeholder groups of a large mining
company. [5]
Mark Scheme:
Stakeholders are groups / individuals that are affected by and/or have an interest in the operations and
objectives of the business. E.g. directors, managers, employees, shareholders, customers, suppliers,
competitors, government, local community, pressure groups, media.
Different stakeholder objectives – profit, wages, cost reduction, job security, safety, share price, payment,
product availability, product quality, product price, environmental impact, local impact, legal issues, tax
receipts, job creation, CSR.
Mining company – large employer, provides fuel (need), building material, gems, minerals etc. All bought by
other businesses and used in consumer products. User of heavy plant and other resources from suppliers.
Possibly large / inter-national company with high level of investment in the area.
Large profits to tax.
Environmental impact likely to be high. Health and safety an issue. Alternative fuels. Possibly labour intensive
(low paid). Possibly high number of shareholders wanting dividends. Products may not be sold in the country
of origin.
Conflict likely where
• Wage rises might be at the expense of lower profits and dividends
• Managers want organisational growth at the expense of short-term profits
• Expansion of production might cause extra noise and disruption in local community
• Long term environmental damage not considered
• Poor working conditions and low pay vs high profits
4. O/N 17/P13/Q3
Explain the responsibilities employees have to the business that employs them. [5]
Mark Scheme:
• stakeholder theory suggests that those interested in and affected by a business have roles, rights,
and responsibilities.
• employees are said to be important business stakeholders and to have important responsibilities in
respect of business performance.
• employees are said to have specific responsibilities to the business that employs them:
– to meet the conditions and requirements of their employment contracts.
– to co-operate with management in all reasonable requests.
– to observe the ethical code of conduct or values in a mission statement.
– to be honest and respect the rights of fellow workers.
– to fulfil Health and Safety requirements.
5. M/J 17/P11/Q5
(a) Analyse why a business needs to be accountable to its stakeholders. [8]
(b) Discuss how there could be conflict between the stakeholders of a fast food retailer. [12]
Mark Scheme:
(a) A definition of stakeholders – people, groups of people who have an interest in, or are affected by,
what a business does and stakeholder theory.
Stakeholder accountability may then be analysed as different stakeholders having different demands
of a business:
• customers – quality/safe products – competitive pricing – ethical selling practices –
demanded.
• employees – job security, safe working practices, training, minimum wages – demanded.
• suppliers – prompt, regular payments – fair treatment - demanded.
• local community – environmental consideration, secure jobs – demanded.
• government – pay taxes, observe laws, publish accounts – required.
• Shareholders – if a plc, shareholders will have concern for dividend levels and share price.
(b) Candidates could refer to business decisions that might lead to conflict situations e.g. introduce new
products, change pricing policy, change pay/remuneration policy and conditions of service, introduce
new opening / closing hours, change the ingredients of products, introduce different
advertising/marketing policies.
The examples given of potential stakeholder conflict situations will of course depend on the
stakeholders and business decisions chosen.
Employees and owners may be in conflict over working conditions, customers may be concerned
about price increases, governments may be in conflict over ‘health’ issues relating to fast food
products.
Some stakeholders may be more important than others and this may vary over time and in relation
to different specific business decisions. Analysis/evaluation may consider the importance of conflict,
the potential impact of conflict, are some stakeholders more important than others and the need to
prioritise stakeholders interests and conflicts.
6. M/J 17/P13/Q7
(a) Analyse the rights and responsibilities of employees as stakeholders in a business. [8]
(b) Discuss how the stakeholders of a public sector organisation might be affected by a
reduction in Government financial support for the organisation. [12]
Mark Scheme:
(a) As stakeholders in a business, employees are said to have certain rights:
• to be given legal entitlements – minimum wage etc.
• to be treated in the workplace as set out in an employment contract – conditions of service,
hours, disciplinary procedures, holiday entitlements.
• to join a union or trade association to protect employment rights.
• to have basic human rights guaranteed.
As stakeholders, employees are also said to have responsibilities:
• to meet the conditions of the contract of employment.
• to be honest and productive.
• to co-operate with managers and supervisors.
• to uphold the ethical codes of behaviour set by a business.
• to respect the confidentiality of the business.
(b) Comment on the characteristic features of a public sector organisation. Speculation on the degree
of importance of the service(s) provided by this public sector organisation (presumably not a vital
service, or a service that could be provided with less governmental financial support.)
Stakeholders affected by such a scenario could include
• Customers/service users may be concerned that services may no longer be available, or
reduced, or subject to price increase if a different form of service provision resulted such as
private sector provision.
• Employees may be concerned about potential job losses if the organisation contracts and
reduced conditions of employment if drastic measures are taken to preserve a reduced
service.
• Unions will be concerned about potential impact on their members.
• Local Government affected by the threat to this public sector organisation
will be concerned for their local economies.
• Suppliers to this public sector organisation will have concerns of the impact of the reduction
in governmental financial support on their businesses.
Good answers will recognise that the impact on stakeholders will very much depend on the extent
of the reduction in financial support, on the discretion available to the public sector organisation to
make savings, gain alternative sources of finance, and/or or make changes to the structure/systems,
and/or management of the organisation.
7. O/N 15/P11/Q7/b
(a) Discuss, with examples, how unethical business behaviour could damage the reputation
of a company. [12]
Mark Scheme:
(a) Candidates can either give theoretical examples of unethical business practices and/or provide actual
examples of companies suffering reputational damage due to unethical or alleged unethical conduct
(e.g. Enron, News of the World, or own country examples).
Candidates may well discuss different types of unethical business behaviour such as:
– poor working conditions for employees or suppliers
– dishonest sales techniques
– environmentally unfriendly production methods
– bribery and corrupt operating policies
– misleading financial reports
Such unethical business practices could lead to:
– loss of trust in the company by customers and employees
– legal action may result, leading to compensation and damage to reputation
– poor publicity affects market standing
– the brand is tarnished
– investors and potential investors respond negatively
– the value of the company can seriously deteriorate leading to liquidation, merger or takeover
• Some evaluative comment on how unethical business behaviour could damage the
reputation of a company. [9–12]
• Analysis of how unethical business behaviour could damage the reputation of a company.
[7–8]
• Discussion of how unethical business behaviour could damage the reputation of a company.
[3–6]
• Limited understanding of unethical business behaviour. [1–2]
8. M/J 15/P13/Q1
(b) Briefly explain two ways a public limited company is accountable to its shareholders. [3]
Mark Scheme:
(a) A stakeholder can be defined as people, groups of people, or organisations that can be affected by
an organisation or have an interest in the actions and activities of that organisation. Examples can be
credited: in addition to a partial definition can justify a second mark. Examples only are to be given 1
mark max.
A definition of a shareholder is too narrow and is not acceptable as an answer to this question.
• Full definition – sound understanding [2]
• Partial definition – limited understanding [1]
(b) A public limited company is accountable to its shareholders in the following ways:
– accountability for the general direction and performance of the company.
– accountability for the financial performance of the company (share price and dividends).
– accountability for compliance with legal requirements, eg employment laws, health and
safety, taxation, equality etc. (these may be cited as separate and specific examples of
accountability).
– accountability for the image, reputation of the company.
– requirement to hold an AGM
[These accountabilities will be managed through appropriate governance organization

arrangements].
• Sound explanation of TWO ways. [3]
• Sound explanation of ONE way, or partial explanation of TWO ways. [2]
• Partial explanation of ONE way or simple statement of TWO ways. [1]
9. O/N 14/P13/Q3
With the aid of two examples, explain how the objectives of one group of business stakeholders
could conflict with those of another group. [5]
Mark Scheme:
Different stakeholders have different expectations, aspirations, and perceptions of what businesses should
do and how they should act, e.g. owners, managers, employees, shareholders, suppliers, governments,
communities.
– Conflict between stakeholders can occur in most kinds of business forms, e.g. partnership, plc, family
owned, public corporation.
– Conflict can occur over a range of issues such as: profit/dividend distribution, compensation,
investment decisions, social responsibility, product/service prices, location and environmental
concerns.
• Limited explanation of stakeholders and/or possible conflict situations. [1]
• Some understanding of how stakeholder groups could conflict with a sound explanation of one set
of stakeholders in conflict, or a limited explanation of two sets of stakeholders in conflict. [2–3]
• Sound explanation of two sets of stakeholder groups who may be in conflict. [4–5]
10. O/N 13/P13/Q4
(b) Briefly explain one way in which conflict may arise between different stakeholder groups
in a business. [3]
Mark Scheme:
(a) Stakeholder’ can be defined as people or groups of people who can be affected by, and therefore
have an interest in, a business/organisation.
• Partial definition given. [1]
• Sound definition given. [2]
(b) Conflict may arise between different stakeholder groups due to:
– Stakeholders who insist on social responsibility policies may conflict with short-term
shareholder interests (profit)
– Consumers/tax payers/communities may suffer at the expense of uncontrolled shareholder
pursuit of profit.
– Employees lose out with companies outsourcing or mechanising or cost cutting.
– Management may receive performance-related pay – other employees basic wage and
sickness, etc.
• Only a general reference to stakeholder groups. [1]
• Partial explanation of one conflict situation. [2]
• Sound explanation of one conflict situation. [3]
11. O/N 13/P11/Q3
Explain the rights and responsibilities of employees as a business stakeholder group. [5]
Mark Scheme:
The rights of employees as a stakeholder group include:
– To be treated within the minimum limits of protective legislation, e.g. minimum wage, health and
safety.
– To be treated by the employer according to employment contract.
– To be allowed to join a trade union – make representations to employers.
The responsibilities of employees as stakeholders include:
– To meet the conditions of the employment contract.
– To co-operate with management in all reasonable requests.
– To observe any ethical code of conduct.
• Limited reference to employees as stakeholders and/or to their rights and responsibilities or
definition of stakeholders. [1]
• Sound explanation of either employee rights or employee responsibilities. [2–3]
• Partial explanation of employee rights and employee responsibilities. [2–3]
• Sound explanation of employee rights and employee responsibilities. [4–5]
12. O/N 11/P13/Q6
Discuss how the closure of a business owning many large retail stores might affect different
stakeholders. [20]
Mark Scheme:
Answers might initially define stakeholders and then identify different ones in this business context –
company closure:
• Employee – job losses, possibility of getting new jobs, depends on local and national economic
situation, probably low skill base, impact on personal family situation.
• Customers – loss of traditional store, reduced choice (though may already have switched shopping
loyalties thus causing the closure).
• Shareholders – if a plc, share price probably hit the floor, giving significant losses.
• Local community – job losses have a multiplier effect leading to local economic depression, impact
of large empty shops in shopping areas.
• Suppliers – possible short-term losses, in search of new buyers.
• Competitors – opportunity to move into the gap created by the closure etc.
Impact depends on the severity of the economic situation and some stakeholders damaged more
than others.
Evaluative comment on the impact of this closure on specific stakeholders (possible comment on the relative
damage done, worst/least affected). [17–20]
Analysis of the impact of this closure on specific stakeholders. [14–16]
Good understanding of the impact on specific stakeholders. [11–13]
Some understanding of the impact on specific stakeholders. [5–10]
Limited comments on stakeholders and/or retail stores. [1–4]
13. M/J 11/P13/Q5/b
(a) Discuss the extent to which businesses are accountable to their stakeholders. [12]
Mark Scheme:
(a) Discussion might initially define stakeholders: anyone affected by a business and/or able to influence
the decisions of a business.
Accountability:
• the essence of business answerability – possibly the notion of corporate governance
• multiple levels of answerability – legal, financial, ethical; the responsibility and requirement
to account to various stakeholders, not just the wealth maximisation of shareholders
• a range of business constituencies are concerned with business performance.
The extent of this accountability depends on a number of factors:
• the activity/influence of various stakeholders and the information made available to them
• the size and nature of the business organisation – different for a plc, private limited
company, partnership, and sole trader
• extent to which mechanisms such as published accounts, annual general meetings, annual
reports are used; role of media in revealing/exposing activity; inside a business the type and
level of communication to staff, trade unions etc.
• the power of an organisation to withhold information or dress up accounts
• passivity of stakeholders etc.
Evaluative comment on the reasons for the ‘why and how’ and the extent of stakeholder
accountability. [11–12]
Analysis of examples of the ‘why and how’ of stakeholder accountability – answers towards the top
of this band will refer to the extent of stakeholder accountability. [8–10]
Shows understanding of the ‘why and how’ of stakeholder accountability. [3–7]
Limited discussion of stakeholders and/or business accountability. [1–2]
14. M/J 11/P12/Q7/b
(a) Discuss the importance of published accounts to three stakeholder groups in assessing
the performance of a company which is planning to expand. [12]
Mark Scheme:
(a) Candidates should identify the stakeholder groups, the importance of performance indicators (from
published accounts) that are relevant to each of the stakeholders, and in the context of a business
that is going to expand.
• Published accounts give quantitative results and those from the balance sheet are only a
snapshot in time.
• The following are examples of relevant stakeholders and performance indicators that may
be important in this context:
– venture capitalists considering financing any expansion will examine existing longterm
liabilities, sales growth in recent times and net profit margins
– banks will review accounts carefully in assessing risk involved in any future lending
– competitors will take an interest in the potential capability of a business to expand, as
evidenced by the financial performance as reported
– managers will be interested in issues such as profitability, cost control, ability to service
future debt etc.
– shareholders may use the accounts to calculate ratios to indicate performance levels and
capability to support expansion (risk).
• Candidates may legitimately apply the same performance indicators to more than one
stakeholder.
• Candidates might unpack the accounts and give examples linked to specific stakeholders.
Reference may well be made to the limitations of the accounts: they are historical
documents, do not reflect qualitative aspects of a business, may be subject to ‘window
dressing’ and may not reflect the true performance of individual parts of a business.
Some evaluative comment on the importance of published accounts to 3 specific stakeholders in
context of a company planning to expand. [11–12]
Analysis of the importance of published accounts to 3 specific stakeholder groups with some
reference to a company planning to expand. [8–10]
Shows understanding of the importance of published accounts for stakeholder groups. [3–7]
Limited understanding of published accounts and/or stakeholders. [1–2]
15. M/J 10/P11/Q4
(a) State two different stakeholder groups in a business. [2]
(b) Briefly explain why one of the stakeholder groups you have identified in part (a) may be
interested in the performance of a business. [3]
Mark Scheme:
(a) Stakeholder groups might include shareholders, employees, suppliers, customers, owners,
community, government.
One relevant stakeholder group identified. (1)
Two relevant stakeholder groups identified. (2)
(b) Explanation might include the following: business performance affects the ways in which the
business can impact on stakeholders in terms of profit share (dividends), salaries and wages and
business continuity/survival, investment repayment/or opportunities for further investment/growth,
ability to pay taxes, ability to assist community environment and satisfy customer demands.
Limited/vague reference to how stakeholder groups’ interests are influenced. (1)
Sound understanding of link between business performance and ONE stakeholder interest. (2)
Sound understanding of the link between business performance and stakeholder interests with ONE
DEVELOPED example. (3)
16. M/J 08/P1/Q3
Explain how two different stakeholder groups might use the published accounts of a business.[5]
Mark Scheme:
Partial/implied explanation of a stakeholder(s) use: (1)
Full explanation of one stakeholder use: (2)
Full explanation of two stakeholders use: (4)
5th mark for a clear context in the form of explanation of the stakeholder concept and/or in the form of an
explanation of published accounts. (This 5th mark might be explicit in the form of a separate statement of
implicit in a comprehensive discussion of stakeholder interests – shareholders, employees, customers,
suppliers, society – internal, external – P&L, balance sheet.) (5)
[3 marks for one fully explained stakeholder use together with a partial/implied explanation of another.]
17. O/N 07/P1/Q5/b
(a) Discuss how different stakeholder groups might view the decision to change from private
Mark Scheme:
(a) Answers should clearly discuss the stakeholder concept and differentiate between different
Shareholders probably want to realise wealth by having quoted shares, but could be concerned
about possible loss of control.
Managers might appreciate publicity and reputation firm could gain, helpful in recruiting, with shares
able to be used as incentive for themselves and other employees.
However, they will be aware that they will be under the spotlight and life might become more
stressful.
Employees want security and higher wages; going public may well make the firm more ruthless and
less of a family business. But expansion will bring more opportunities to the ambitious.
Suppliers want security, continuity and higher prices; Plcs should be safer to trade with but could be
more ruthless.
Customers want top quality and lowest prices. A Plc should be more able to provide that.
The Community will be looking for continuity and growth, which hopefully this will provide, but the
risk of takeover and closure (or asset stripping) could worry them.
Evaluative comment which makes reference to the possible balance between benefits and
drawbacks of the decision to change. [11–12]
Sound analysis of the views of different stakeholders (at least 2) of the decision to change. [8–10]
Shows good understanding of different aims and objectives of stakeholder groups. [3–7]
Shows some understanding of the stakeholder concept. [1–2]
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+92-42-35714038 +92-336-5314141 www.readnwrite.org readandwritepublications/Shop

Title Topical Business P-1 (Article# 137)

UNIT 1 BUSINESS AND ITS ENVIRONMENT ........................................................................... 6

Syllabus 2019 –21

Lahore Sale Point: Shop # 25-28 Lower Ground

UNIT 1 Business and its Environment

14. O/N 13/P11/Q6

1.2 Business Structure

22. O/N 11/P13/Q1

1.3 Size of Business

1.4 Business Objectives

45. M/J 05/P1/Q5/a

1.5 StakeHolders In A Business

14. M/J 11/P12/Q7/b

• Ability to lead and inspire employees.

11. M/J 16/P12/Q1

13. O/N 14/P12/Q7

1.2 Business Structure

• Cost of changing to a private limited company.

• Cover for holidays/sickness can be provided by other partners.

to establish and gain market share

Partial explanation of ONE benefit or simple statement of TWO benefits. [1]

countries. Advantages include opportunities for joint ownership–more employee motivation,

22. O/N 11/P13/Q1

increase market share • provide employment survive.

Some analysis of the benefits of being a public limited company. [5–6]

(a) Public sector central/local govt. controlled, private sector is enterprises/companies.

35. O/N 03/P1/Q6/b

1.3 Size of Business

Sound explanation of two reasons. [3]

15. O/N 05/P1/Q7/a

1.4 Business Objectives

• corporate objectives in a single business company might include growth, profit

– investors and potential investors respond negatively

21. O/N 14/P11/Q3

Analysis of reasons for businesses not setting growth as an objective. [7–8]

– pursue social responsibility rather than just profit.

– A business in pursuit of longer-term profit objectives may adopt a ‘societal marketing’

• analysis of the link between corporate and marketing objectives [7–8]

The advantages of an ethical stance include:

• Some understanding of the potential value of ethical objectives. (5–10)

Descriptive comment on ethical issues and business activities. (5–10)

Two objectives stated [e.g. survival, profitability, market share] (2)

1.5 Stakeholders in a Business

[These accountabilities will be managed through appropriate governance organization

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