Cambridge IGCSE™ (9–1)

BUSINESS STUDIES 0986/12

Paper 1 Short Answer/Structured Response May/June 2020
MARK SCHEME
Maximum Mark: 80

Published

Students did not sit exam papers in the June 2020 series due to the Covid-19 global pandemic.

This mark scheme is published to support teachers and students and should be read together with the
question paper. It shows the requirements of the exam. The answer column of the mark scheme shows the
proposed basis on which Examiners would award marks for this exam. Where appropriate, this column also
provides the most likely acceptable alternative responses expected from students. Examiners usually review
the mark scheme after they have seen student responses and update the mark scheme if appropriate. In the
June series, Examiners were unable to consider the acceptability of alternative responses, as there were no
student responses to consider.

Mark schemes should usually be read together with the Principal Examiner Report for Teachers. However,
because students did not sit exam papers, there is no Principal Examiner Report for Teachers for the June
2020 series.

Cambridge International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the June 2020 series for most Cambridge
IGCSE™ and Cambridge International A & AS Level components, and some Cambridge O Level
components.

This document consists of 11 printed pages.

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Generic Marking Principles

These general marking principles must be applied by all examiners when marking candidate answers.
They should be applied alongside the specific content of the mark scheme or generic level descriptors
for a question. Each question paper and mark scheme will also comply with these marking principles.

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.

GENERIC MARKING PRINCIPLE 2:

Marks awarded are always whole marks (not half marks, or other fractions).

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit
is given for valid answers which go beyond the scope of the syllabus and mark scheme,
referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these
features are specifically assessed by the question as indicated by the mark scheme. The
meaning, however, should be unambiguous.

GENERIC MARKING PRINCIPLE 4:

Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.

GENERIC MARKING PRINCIPLE 5:

Marks should be awarded using the full range of marks defined in the mark scheme for the question
(however; the use of the full mark range may be limited according to the quality of the candidate
responses seen).

GENERIC MARKING PRINCIPLE 6:

Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should
not be awarded with grade thresholds or grade descriptors in mind.

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Question Answer Marks

1(a) Define ‘specialisation’. 2

Award 2 marks for a full definition. Award 1 mark for a partial definition.

Way in which work is divided so each worker concentrates on a specific task

so become expert at it [2]

When people and businesses concentrate on what they are best at [2]

Partial definition e.g. workers do only one job [1]

1(b) Identify two reasons why a government might introduce import 2

controls.

Award 1 mark per reason.

Points might include:

• Protect jobs from cheap labour in other countries
• To improve trade deficit
• Protect newly started/infant industries
• To earn more revenue from tariffs
• Protect local businesses from low priced competition
• Protect important national or strategic industries

Other appropriate responses should also be credited.

1(c) Outline two ways DWT could try to ensure quality production. 4

Award 1 mark for each relevant way.

Award 1 mark for each relevant reference to this business.

Points might include:

• Quality control [k] so check products before they are exported [app]
• Quality assurance [k] when making solar panels [app]
• Training/recruit skilled employees [k] to make full use of specialisation
[app]
• Use better quality materials [k] which could afford to pay for as it is a low-
cost country [app]
• Use new technology/CAM/CAD [k]

Other appropriate responses should also be credited.

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Question Answer Marks

1(d) Explain one objective of each of the following stakeholder groups of 6

DWT.

Award 1 mark for identifying the objective of each stakeholder group (max 2).
Award 1 mark for each relevant reference made to this business (max 2).
Award 1 mark for each relevant explanation (max 2).

Points might include:

Customers
• would want high quality products [k] to achieve value for money [an]
which is why quality production is important [app]
• may want affordable prices [k]

Pressure groups
• encourage the use of sustainable methods [k] such as solar panels
[app] to protect the environment [an]
• reduce/limit amount of pollution/environmental damage [k]

Other appropriate responses should also be credited.

1(e) Do you think that all businesses will benefit from operating in a country 6
which is experiencing rapid economic growth? Justify your answer.

Award up to 2 marks for identification of relevant issues.

Award up to 2 marks for relevant development of points.
Award 2 marks for justified decision as to whether all businesses will benefit
from operating in a country which is experiencing rapid economic growth.

Points might include:

• Economic growth increases consumer incomes [k] which increases
demand for most goods [an]
• Rapid economic growth can lead to higher rate of inflation [k] which
raises firms’ costs/reduces profit margin [an]
• Patterns of consumer demand might change [k] reducing revenue for
some businesses [an]
• Could lead to shortage of skilled workers [k] so have to offer pay to
attract/retain employees leading to higher costs [an]

Justification might include:

• No - unlikely all businesses will benefit as it depends on what they sell as
if they sell basic goods, customers may switch to more expensive items
as their incomes increase leading to fewer sales for some businesses
and higher sales for others. [eval] [eval]

Other appropriate responses should also be credited.

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Question Answer Marks

2(a) Define ‘trade union’. 2

Award 2 marks for a full definition. Award 1 mark for a partial definition.

Group of workers who join together to ensure their interests/rights are

protected [2]
Organisation which represents the workers and fights for improvements to pay
and conditions [2]

Partial definition e.g. A group who fight for workers’ rights [1]

2(b) Calculate the average cost of one motorcycle. Show your working. 2

Award 2 marks for a correct calculation: 400

Award 1 mark for correct method e.g. 1 200 000/3000

OR total cost / total output

2(c) State four features of an income statement. 4

Award 1 mark for each relevant feature.

Points might include:

• Revenue
• Cost of sales
• Gross Profit
• Profit (for the year)
• Retained Profit
• Expenses

Other appropriate responses should also be credited.

2(d) Explain two possible problems for MLC of relocating its operations to 6
another country.

Award 1 mark for identification of each relevant problem (max 2).

Award 1 mark for each relevant reference made to this business (max 2).
Award 1 mark for each relevant explanation (max 2).

Points might include:

• Access to suitable employees/not easy to find employees [k] as at new
site will need 150 new employees [app] increasing recruitment/training
costs [an]
• Access to/cost of suitable land [k] as will need a big space[an] to make
motorcycles [app]
• Different legal controls/standards [k] in the new factory [app] which may
mean have to change how/where operate [an]
• Could be further away from market/suppliers/need to find new suppliers
[k] which increases transport costs [an]
• Communication problems [k] as may need to learn a new language [an]
so takes longer to complete on-the-job training [app]

Other appropriate responses should also be credited.

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Question Answer Marks

2(e) Do you think on-the-job training is a better method of training for a 6

manufacturing business to use than off-the-job training? Justify your
answer.

Award up to 2 marks for identification of relevant points.

Award up to 2 marks for relevant development of points.
Award 2 marks for justified decision as to whether on-the-job training is a
better method of training for a manufacturing business to use than
off-the-job training.

Points might include:

Off-the-job training:
• Not necessarily tailored to individual business [k]
• Have to pay more/high cost for specialists [k] which increases costs [an]
• Skills might not be available in the business [k] so benefit from new
techniques/ideas [an]
• Allows for mistakes to be made when learning [k] so less likely to waste
resources when working/lower risk of damaging business reputation [an]

On-the-job training:
• Can reinforce errors/bad habits of trainer [k] reducing sales/damage
reputation [an]
• Fewer new ideas/skills will be taught [k]
• Control what is taught/employees learn exact way business wants things
done [k] so workers only learn skills needed [an]
• Employees can carry on working [k] so some output is still produced [an]
• Cheaper (than off-the-job) [k]

Justification may include:

• No, as it depends what the training is for – if using new techniques/
machines the business may not have a suitable person to train others
so on-the-job is not an option so it would have no choice and would
have to use off-the-job training. [eval] [eval]

Other appropriate responses should also be credited.

Question Answer Marks

3(a) Define ‘business plan’. 2

Award 2 marks for a full definition. Award 1 mark for a partial definition.

A document containing the business aims/objectives and important details

about the operations, finance and owners of a business [2]
States aim and/or objectives and shows how business aims to achieve them
[2]

Partial definition e.g. a document showing what the business intends to do

[1]

Other appropriate responses should also be credited.

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Question Answer Marks

3(b) Identify two reasons why a business might downsize its workforce. 2

Award one mark per reason (max 2).

Points might include:

• Economic crisis
• Factory/shop/office closure
• Merger or takeover
• Need to reduce costs
• Changes in management/strategy
• Automation or replaced by machinery
• Excess workforce
• Relocation

Other appropriate responses should also be credited.

3(c) Outline two reasons why Kala’s business might need finance. 4

Award 1 mark for each relevant reason (max 2).

Award 1 mark for each relevant reference to this business. (max 2).

Points might include:

• Increase working capital/examples such as buy inventory or
materials/pay day to day costs [k] so prevent cash flow problems [app]
• To expand/buy more non-current assets [k] so she can enter different
market segments [app]
• To pay for market research and advertising [k] of her sportswear [app]

Other appropriate responses should also be credited.

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Question Answer Marks

3(d) Explain one advantage and one disadvantage to Kala of using e- 6

commerce to sell her products.

Award 1 mark for identification of each relevant advantage and

disadvantage (max 2).
Award 1 mark for each relevant reference made to this business (max 2).
Award 1 mark for each relevant explanation (max 2).

Points might include:

Advantages:
• Able to target customers [k] who are mainly women [app] so better able
to attract attention of people most likely to buy her products [an]
• Less rent/fewer employees needed [k] which can help reduce costs [an]
for her sportswear [app]
• Easy to update [k] so keep customers informed [an] about the ways the
products can be customised [app]
• Widen market/more potential customers [k] which can increase revenue
[an]

Disadvantages:
• Difficult to stand out from competition [k] at a time when she is worried
about increased competition [app] leading to lower sales [an]
• Not everyone has access to internet [k]
• No passing trade [k] so could mean fewer sales [an]
• Increased costs of postage/distribution [k] as need to arrange for
delivery/vans [an]
• Need to pay for pop-ups to advertise on popular sites [k]
• Lack of personal service [k]
• Customers may want to try before buy [k]

Other appropriate responses should also be credited.

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Question Answer Marks

3(e) Do you think selling to different market segments is the best way for a 6
small business to respond to increased competition? Justify your
answer.

Award up to 2 marks for identification of relevant issues. Award up to 2

marks for relevant development of points.
Award 2 marks for justified decision as to whether selling to different market
segments is the best way for a small business to respond to increased
competition.

Points might include:

Targeting a new segment:
• Wider market base [k] could increase sales revenue [an]
• Spreads risk [k] as not reliant on one market for sales [an]
• Need to know reaction/current level of competition [k] as customers
may be loyal to other businesses so not easy to obtain sales [an]
• High cost and time involved developing new products [k]
• Cost of promotion [k] as need to attract customer’s attention [an]

Other issues or ways could be discussed such as:

• Could change prices e.g. lower prices could lead to lower profit
margin/seen as lower quality [k] which could lower sales [an]
• Size of market could be a factor as if niche market [k] this will limit number of
possible sales [an]

Justification might include:

• Yes, selling to other segments means spreading risk [k] as not reliant
on one market for sales [an]. This is much better than charging lower
prices [k] could reduce revenue [an] if they cannot generate enough
extra sales to cover the price reduction which could be a major issue for
especially for a small business who not have the sufficient funds to be
keep lower prices [eval] so could struggle to remain competitive [eval]

Other appropriate responses should also be credited.

Question Answer Marks

4(a) Define ‘profit’. 2

Award 2 marks for a full definition. Award 1 mark for a partial definition.

Profit is the amount of money that a business makes once costs have been
subtracted from the revenue [2]
Total revenue minus total costs [2].

Partial definition e.g. money left after costs paid [1]

Note: For both marks must have idea that there is both sales and cost
element to profit.

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Question Answer Marks

4(b) State two problems of using the number of employees to measure the 2
size of a business.

Award 1 mark per problem.

Points might include:

• Might use a lot of machines,
• Difficult to count part-time employees

Other appropriate responses should also be credited.

4(c) Outline two possible ways ALB can try to reduce its costs. 4

Award 1 mark for each relevant way.

Award 1 mark for each relevant reference to this business.

Points might include:

• Reduce number of employees [k] by making some of the 5000
employees redundant [app]
• Close number of branches [k] from 300 [app]
• Reduce amount of wastage [k] by using less paper when dealing with
business customers [app]

Other appropriate responses should also be credited.

4(d) Explain two ways ALB could improve customer loyalty. 6

Award 1 mark for identification of each relevant method (max 2).

Award 1 mark for each relevant reference made to this business (max 2).
Award 1 mark for each relevant explanation (max 2).

Points might include:

• Communicate with customers e.g. newsletters, social media [k] so that
they remember your business [an] when they next need financial
services/help from bank [app]
• Offer good quality service [k] so customers want to return [an] to the 300
branches [app]
• Train staff [k] so all 5000 employees [app] are able to offer a good
quality service [an]
• Ask for feedback e.g. surveys [k] to find out how/what they need to do to
improve [an]
• Resolve complaints quickly [k] so that customers don’t change to
another bank [an] as it is a competitive market [app]
• Offer rewards/ loyalty programs [k] such as discounts for business
customers who also use them for its personal banking [an]
• Offer extra services such as online/mobile phone app [k]

Other appropriate responses should also be credited.

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Question Answer Marks

4(e) Do you think changes in legal controls over employment issues will 6
always reduce business profits? Justify your answer.

Award up to 2 marks for identification of relevant issues.

Award up to 2 marks for relevant development of points.
Award up to 2 marks for justified decision as to whether changes in legal
controls over employment issues will always reduce business profits.

Points might include:

• Health and safety changes could mean needing to provide more training
[k] increasing costs [an] but leading to more motivated/more efficient
employees [an]
• Can depend on how much the minimum wage increases [k] as may
already pay above the new rate so may not affect them [an]
• Can depend on the type of business [k] as health and safety may be
more of an issue if it is a manufacturing business [an]

Justification might include:

• Yes, because any changes in legal control are likely to result in the
business at least having to do something even if it is only to check they
are compliant, which will cost time and money to do. [eval] [eval]

Other appropriate responses should also be credited.

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