™

Cambridge IGCSE

BUSINESS STUDIES 0450/12

*6148412007*

Paper 1 Short Answer and Data Response February/March 2020

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
• Answer all questions.
• Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
• Write your name, centre number and candidate number in the boxes at the top of the page.
• Write your answer to each question in the space provided.
• Do not use an erasable pen or correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 80.
• The number of marks for each question or part question is shown in brackets [ ].

This document has 12 pages. Blank pages are indicated.

03_0450_12_2020_1.24
© UCLES 2020 [Turn over
 2

1 HSN uses batch production to make breakfast cereals. The products are sold using several
distribution channels. HSN employs 600 production workers. HSN has problems with many
employees leaving. Following the dismissal of the Operations Manager, the Human Resources
Director has to recruit a new manager. She said: ‘The person must have good communication skills
to help solve the communication barriers HSN has with employees.’ The Human Resources Director
has to decide whether to use internal recruitment or external recruitment for the new manager.

(a) Define ‘dismissal’.

when employee are told to leaving the business due to behaviour or unsastifactory
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) State two distribution channels a business might use.

Distribution channel 1: ......................................................................................................

wholesaler

...........................................................................................................................................

Distribution channel 2: ......................................................................................................

agent
........................................................................................................................................... [2]

(c) Outline two possible problems to HSN of many employees leaving.

Problem 1: ........................................................................................................................
less out put meaning that demand might not be able to meet reducing sales and
profit
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
cost of recruiting employees as they need to fill in some workers to complete
Problem 2: ........................................................................................................................
their 600 workers as they might use that cost for production or marketing instead
...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [4]

© UCLES 2020 03_0450_12_2020_1.24

 3

(d) Explain how each of the following could cause communication barriers within HSN.
might not be able to understand as the language use in the organisation may contaian
Language: .........................................................................................................................
difficult word and too much technical words that might lead to misunderstanding and unable
to sastify the needs in the messages.
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

wrong medium so cant use the selected method which might not
Medium of communication: ...............................................................................................
get to the employee feed.
...........................................................................................................................................
physical breakdown of the medium so the message will never be recieved
...........................................................................................................................................
which is important as using lots of distribution channel.

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

(e) Do you think external recruitment is better than internal recruitment when recruiting a new
manager for a large business? Justify your answer.

...........................................................................................................................................
no
yes
high cost
...........................................................................................................................................
new ideas and experience
dont know how business work
fill the missing gap(skill)
take time to get used to it which delay the output
...........................................................................................................................................
avoid upsetting the insider if one get
insider might be more motivated to get a promotion
promoted but the others dont
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
i believe it will be better to use external if there is no suitable worker inside the business even if it is more
expensive. but it might be able to bring news idea which isnt in the business and the process might be
...........................................................................................................................................
better for large business as cost will be killed when out put increased.
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 03_0450_12_2020_1.24 [Turn over

 4

2 Gomez is a sole trader. He provides painting and decorating services to business customers. His
business does not benefit from any economies of scale because it is small. Gomez has to pay his
suppliers within 1 month. However, he gives customers 3 months to pay. Gomez uses an old van
he has borrowed from his father to travel to his customers’ offices and shops. As the van often
breaks down, Gomez is thinking of buying a new van. A cash-flow forecast for the next 3 months
is shown in Table 2.1.

Table 2.1
Cash-flow forecast for Gomez’s business ($)

April May June

Cash in 3 000 2 800 2 600

Cash out 2 600 3 000 Y

Net cash flow X (200) 200

Opening balance 200 600 400

Closing balance 600 400 600

(a) Define ‘economies of scale’.

factor that lead to lower average cost as business increase in size.

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) Calculate X and Y.

X: ......................................................................................................................................
400

Y: ......................................................................................................................................
2400 [2]

© UCLES 2020 03_0450_12_2020_1.24

 5

(c) Outline two factors Gomez should consider when choosing a source of finance for the new
van.

Factor 1: ...........................................................................................................................
amount needed
to pay supply
...........................................................................................................................................
as cash avai is only 600(closing balance)
...........................................................................................................................................

...........................................................................................................................................
tyoe of business as he operate as a sole trader so unlimited liability so the giver
Factor 2: ...........................................................................................................................
might consider (such as banK0 whether to lend it or not
...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [4]

(d) Explain one advantage and one disadvantage to Gomez of being a sole trader.

get all profit

Advantage: .......................................................................................................................
to pay supplier
...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Disadvantage: ...................................................................................................................
unlimited liabilty
need to pay everything including his fixed asset if fail and not able to pay supply
...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 03_0450_12_2020_1.24 [Turn over

 6

(e) Do you think asking customers to pay more quickly is the best way for a small business to
improve its cash-flow? Justify your answer.

yes no
...........................................................................................................................................
more cash in flows might lose customer loyalty
no need to borrow so no interest
...........................................................................................................................................
reducing cash outflows

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
maybe ask supplier to delay payment as they are a small busines so dont want customer
to run away
...........................................................................................................................................
actually depend on current capital they have and how long will the credit last?

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 03_0450_12_2020_1.24

 7

3 Globalisation has changed the way many businesses operate. VKW makes cell (mobile) phones.
It uses just-in-time inventory control. VKW exports 40% of its products. It imports most of its raw
materials to help reduce total costs. All 800 of VKW’s employees understand the importance of
quality assurance. The Operations Director has asked all suppliers to ensure they do not use child
labour. She is also concerned that many governments are planning to increase import controls
such as quotas.

(a) Define ‘globalisation’.

country are connected together by trading of good and services

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) State two advantages to a business of using quality assurance.

no cost of inspector/ no cost of inspection

Advantage 1: ....................................................................................................................

...........................................................................................................................................
less wastage cost
Advantage 2: ....................................................................................................................

........................................................................................................................................... [2]

(c) Outline two ways VKW might be affected by increased import controls.

Way 1: ...............................................................................................................................
more expensive to import so idea of reducing total cost might decrease

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
might not be able to export all its 40 percent of its phone as there is less inventory
Way 2: ...............................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
spend time to find local supply as it import raws material [4]

© UCLES 2020 03_0450_12_2020_1.24 [Turn over

 8

(d) Explain one advantage and one disadvantage to VKW of using just-in-time inventory control.

less warehouse cost

Advantage: .......................................................................................................................

...........................................................................................................................................
material only come when there is a demand from customer so there is less storage cost
Explanation: ......................................................................................................................
being spend on which reduce cost
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Disadvantage: ...................................................................................................................
may not be on time

...........................................................................................................................................

Explanation: ......................................................................................................................
when unexpected demand come, might not be able to import on time as it take time to
transport material so might decrease sale as they might turn to competitor instead.
...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

(e) Do you think that businesses should be concerned about ethical issues such as child labour?
Justify your answer.
yes
...........................................................................................................................................
brand image
attract customer
...........................................................................................................................................
avoid boycott
customer loyalty
...........................................................................................................................................
however
might be high cost(total cost)
...........................................................................................................................................
might not have enough capital
...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................
i feel like they should cuz making profit is imprtant and it come from sale
pressure group might try to influence business activity by boycotting the
...........................................................................................................................................
product. also if ethical might attract new customer and boost image...
also investor
...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 03_0450_12_2020_1.24

 9

4 WFG is a private limited company in country X. It owns 120 supermarkets, of which 20 are operated
as franchises. One of WFG’s objectives is to expand by opening 30 more shops in the next 18
months. The Managing Director said: ‘Market research shows that fewer people are going to the
local markets every day to buy their food. It is important for us to set prices at the right level.’ The
Managing Director is thinking about whether to introduce new technology into the business.

(a) Define ‘market research’.

...........................................................................................................................................
business activity to analyse intepret and gathering information of the market

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) State two objectives (other than expansion) a business might have.

make profit
Objective 1:........................................................................................................................

...........................................................................................................................................
increase market share
Objective 2:........................................................................................................................

........................................................................................................................................... [2]

(c) State four factors a business should consider when deciding the price of a product.
type of product
Factor 1:............................................................................................................................

...........................................................................................................................................
level of demands
Factor 2:............................................................................................................................

...........................................................................................................................................

competitor price
Factor 3:............................................................................................................................

...........................................................................................................................................

cost of prodcution
Factor 4:............................................................................................................................

........................................................................................................................................... [4]

© UCLES 2020 03_0450_12_2020_1.24 [Turn over

 10

(d) Explain two factors WFG should consider when deciding whether to introduce new technology
into its business.

Factor 1: ...........................................................................................................................
cost of the technology as it has 120 supermarkets so might not be affordable

...........................................................................................................................................

Explanation:.......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

level of demand as many people buy at local market so might not be able to justify cost
Factor 2:............................................................................................................................

...........................................................................................................................................

Explanation:.......................................................................................................................

...........................................................................................................................................
cost of training as need to train the franchisee in order to sell well so increase expense
...........................................................................................................................................

........................................................................................................................................... [6]

(e) Do you think selling franchises is a better way for a retail business to expand than opening
more of its own shops? Justify your answer.

...........................................................................................................................................
franchisee might ruin brand image
profit from selling franchise poor management
...........................................................................................................................................
franchisee know the local better reduce profit to the owners
easy to target market
...........................................................................................................................................
expand faster than other methods
time to focus other
...........................................................................................................................................

...........................................................................................................................................
franchise sound better as it is faster process and local know what each block want so
might increase sale faster and franchiosr can give extra support to help that might not affect]
...........................................................................................................................................
much image so it is better and they also benefit alot from selling franchise too.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 03_0450_12_2020_1.24

 11

BLANK PAGE

© UCLES 2020 03_0450_12_2020_1.24

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment
International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 03_0450_12_2020_1.24