Mark Scheme (Results) June 2011

1 Mark Scheme (Results) June 2011 GCE Business Studies (6BS04) Paper 01 Edexcel is one of the leading examining and awarding bodies in the UK and throughout the world. We provide a wide range of qualifications including academic, vocational, occupational and specific programmes for employers. Through a network of UK and overseas offices, Edexcel s centres receive the support they need to help them deliver their education and training programmes to learners. For further information, please call our GCE line on 0844 576 0025, our GCSE team on 0844 576 0027, or visit our website at If you have any subject specific questions about the content of this Mark Scheme that require the help of a subject specialist, you may find our Ask The Expert email service helpful.

2 Ask The Expert can be accessed online at the following link: Alternatively, you can contact our Business/Economics Advisor directly by sending an email to Business specialist on You can also telephone 0844 372 2187 to speak to a member of our subject advisor team. June 2011 Publications Code UA027503 All the material in this publication is copyright Edexcel Ltd 2011 Question Number Question 1. What is meant by the term Corporate Social Responsibility? Answer Mark Knowledge up to 2 marks A definition of Corporate Social Responsibility The extent to which a business accepts social responsibilities over and above the legally required minimum.

3 Definition may include reference to ethics. Examples might include: Let it Grow Scheme ; recycling of carrier bags; school voucher for 10 spent etc. Note: 1 mark for partial explanation, but a valid extension or example will gain the second mark 1-2 Question Number Question 2. What is meant by the term Capital Expenditure ? (Evidence A, line 12 ) Answer Mark Knowledge up to 2 marks: A definition of Capital Expenditure Expenditure on Fixed Assets such as premises and machinery. Spending over a year sufficient for one mark. Examples might include: IT services; store expansion Note: 1 mark for partial explanation, but a valid extension or example will gain the second mark 1-2 Question Number Question 3.

4 Analyse how a conflict between two different stakeholder groups might result from the spelling errors outlined in additional evidence H. Answer Mark Knowledge up to 2: Knowledge mark available for definition of a stakeholder Knowledge of one stakeholder group: customers; suppliers; employees; shareholders; managers; pressure groups etc. One mark for each appropriate stakeholder mentioned Application up to 2 Morrison s customers will see the reputation of the store damaged Chinese suppliers may lose out on valuable contracts Managers and employees may face increased complaints Pressure groups (consumer groups)

5 Might get involved As a retailer Morrisons would be expected to give refunds Any other relevant information that relates to the pre-release or additional evidence Analysis up to 2 Sales are likely to suffer, so managers may be under increased pressure Customers will associate Morrison s with poor quality and this may damage non-food sales Morrison s may be forced to use alternative and possibly more expensive suppliers. Managers may face increased complaints increasing their stress levels Pressure (consumer) groups might see it as unethical to knowingly sell a faulty product. 1-2 1-2 1-2 Total (6 marks) Question Number Question 4.

6 In 2008 Morrison s Capital Employed was 4,378m, and in 2009 it was 4,520m. Using this information and Evidence B, calculate the Return on Capital Employed for 2008 and 2009 Answer Mark Knowledge up to 2 Correct ROCE formula (Operating profit/Capital Employed X100) (2 mark) Knowledge of Capital Employed (1 mark) Application up to 2 ROCE = 14% ( ) in 2008 612m/ 4378mX100 15% ( ) in 2009 671m/ 4520mX100 Notes: - Two correct answers, no working/no formula 4 marks - Missing % cap at 3 marks - Correct answers, years inverted 3 marks - Correct calculations based on Gross Profit.

7 818m in 2008 (19%) and 913m in 2009 (20%) cap at 2 marks - Correct calculations based on Profit/Loss for period: 554m in 2008 ( ) and 460m ( ) in 2009 cap at 2 marks 1-2 1-2 Total (4 marks) Question Number Question 5. In 2008 Morrison s Gearing figure was 12%, and in 2009 it was 14%. Using this, and any additional relevant information, evaluate Morrison s plans to open more stores in the South of the UK (Evidence A). Answer Mark Application up to 2 Candidate uses appropriate figures and relates these to Morrison s current situation Gearing is still low Candidate picks out other financial information that might be relevant ROCE; Profit etc.

8 Candidate applies other relevant information takeover of Co-op stores Expansion plans may have increased gearing (no explanation) Analysis up to 4 Gearing figure is increasing, but the business is still low-geared , which makes it less vulnerable to interest rate increases on the cost side Low gearing ratio may make them more attractive to banks Return on Capital Employed figures are stable Morrison s could be looking at ways of improving this figure in the long-term through increased sales and therefore operating profit Overall profit for the period is down due to increased finance costs and taxation this could be limiting if expansion is to be financed out of retained profit Pre-tax profit is up though Additional relevant information might include.

9 - Aiming to increase market share - Competing with other supermarkets - Moving into new geographical markets - Purchase of Co-op stores NB Cap at 4 if only Gearing figure is used (2 Application, plus 2 analysis) Cap at 4 if analysis present without reference to Gearing. (2 Application, plus 2 analysis) Evaluation up to 2 Candidate looks at financial reasons for and against expansion these are unlikely to be well-developed in such a short question Possible responses: - Gearing is low but overall profit down, so expansion is too risky - Gearing is low, so borrowing to finance expansion is an option - Return on Capital Employed is stable and relatively high, which may serve as a reason to avoid disruptive changes - Investors may see potential long-term financial gain from expansion 1-2 1-4 1-2 Total - ROCE not especially relevant to expansion decision - Financial cost of expansion not discussed, but is hugely relevant.

10 (8 marks) Question Number Question 6. Assess the likely value of ansoff s matrix in shaping Morrison s expansion. Level Mark Descriptor Possible Content Level 1 1-2 Candidate shows knowledge of ansoff s matrix . ansoff s matrix is a box containing terms such as diversification , market development and is used to explain business strategies Drawing of ansoff matrix with appropriate labels 2 marks Level 2 3-4 Answers should be applied to Morrison s. Morrison s proposals are examples of Market development existing products to a new geographical market Could also be argued to be Market penetration more of same to existing markets segments etc.