The BRITISH INTERNATIONAL SCHOOL

INTERNALMOCK EXAMINATIONS 2015

CANDIDATENAME

TEACHER

Subject:
Level:
Paper:

BUSINESS AND MANAGEMENT

Date:

January 2015

HIGHER LEVEL
1

MARK
SCHEME

SECTION B

SECTION A
1.
(a) Define the following terms:
i.

Sole trader (line 5)

[2 marks]

Aka sole proprietor, is an individual who owns his or her own personal business. The own runs and
controls the business and is the one held responsible for its success or failure. E.g. Mr. Carroccio.
ii.
Mission statement (line 11)
[2 marks]
This is a simple declaration of the underlying purpose of an organisations existence and its core values.
They do not have a time frame and tend to be qualitative rather than quantitative. They are aimed at
providing a sense of direction, guiding decision making and unifying all people and corporate cultures in
the organization.
Mrs. Carroccio worked for an NPO whose mission statement was to help all adult immigrants learn
English.
(b) Explain why Alejandra needed the protection of limited liability as her business grew. (Line 90)
[4 marks]
Alejandra and the other stakeholders of LAM do not have to bear the responsibility of the
companys debts- they are safeguarded from paying using their personal property.
Easier to attract both commercial and private investors as risk of investment is reduced.
Potential to increase significant funding
Increase in firms size results in economies of scale

(c) Apart from limited liability, analyse two other advantages to LadyA Management Limited (LAM) of
operating as a private limited company. (line 91)
[7 marks]

2.
(a) Define the following terms:
i.

Product life cycle (line 52)

ii.

Family branding (line 152)

[2 marks]
This refers to the marketing of a range of products under a single brand identity (name).
The family brand encompasses all products of the business e.g. LadyA cosmetics,
perfumes, music etc.

(b) Identify and briefly explain two benefits of branding to Alejandra.

[2 marks]

[4 marks]

LadyA

LAM

perfumes

LA
M

using LadyA perfume.

LA
LadyAs music appeals to Hispanics
especially teenage girls and young women. As the brand
M
identity strengthens, LadyA products might not attract potential customers who do not identify
with her glamorous image.

(c) With reference to the case study, identify and explain two other extension strategies suggested by
Ruth Liebermann that Alejandra could use to extend her product life cycle. [7 marks]
Line 56: Appearing on cover of high profile magazines. Ruth suggested she dresses more glamorously
like a young woman. LadyA was nervous about the transition hence hired Gavin Partt, a hairdressing and
style expert. Her new image would appeal to more (new) consumer segments hence increasing her
revenue streams. However, hiring Gavin would increase her operational costs.
Line 61: be less ethnic- Change identity from Lady Alejandra to Lady!. She became one of the most
successful musicians in the US by the year 2000. Her English songs were popular even amongst Spanish
speakers. She was seen as a shining success story of Hispanic-Americans. By 2001, she was earning
millions of dollars.

LAM

LAM

3.
(a) Explain why entrepreneurs such as Mr. Carroccio, operating as sole traders, would face difficulties
in securing sources of finance (line 8) to fund their business startups.
[4 marks]

(b) Identify and briefly explain two alternative sources of finance that entrepreneurs such as Mr.
Carroccio could use to start their businesses.
[4 marks]
Adjust to reflect LadyA situation:

LadyA

Do not award bank loan, personal savings or government grant.

(c) With reference to the case study, identify and explain the importance of one profit centre and one
cost centre used by LadyA Management Limited (LAM)
[7 marks]

Profit centre- is a department or unit of a business that incurs both profits and revenues. It is manily
used by large diversified businesses with a broad product mix. ladyA Management was growing and
providing several products which can be viewed as profit centres.
Profit centres:
Music CD sales
Magazine covers
Music videos
Concerts
Perfumes and cosmetics
Core/ temporary employees
Cost centre- is a department or unit of a business that incurs costs but is not involved in making any
profit. Video hosting websites/ video productions
Peripheral employees
Importance of profit and cost centres:
a) Accountability for contribution to cost and profits/ costs- mangers are made to become more
accountable
b) Easy to see which centres are costly
c) Areas of financial weaknesses can be identified
d) Better team spirit and productivity
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e)
f)
g)

Costs can be allocated across different business units

Benchmarking of most cost-efficient unit
Motivational and rewarding tool

SECTION B
Answer the compulsory question from this section.
4.
(a) Define the following terms:
i.

Copyrights (line 34)

[2 marks]
These provide a legal protection for the original artistic work of a creator e.g. author,
painter, photographer or musician like LadyA. Anyone wishing to modify or reproduce the
artistic work must first seek the permission of the copyright holder for a fee.

ii.

Batch production (line 116)

[2 marks]

(b) Explain the importance of intellectual property rights such as copyrighted material (line 94) to
musicians such as LadyA.
[4 marks]

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(c) Explain why batch production would be the most suitable method of production for LadyA perfume
and cosmetics. (line 116)
[4 marks]
Batch production is suitable for perfumes and cosmetics:
Producing a limited number of units
Making a range of perfumes and cosmetics e.g. based on size, market segment, colour
Offers a variety of items
May be used when the level of demand is unclear
Production can be stopped, to work on a more urgent order.
(d) Evaluate the use of quality control as a method of quality management in the production of LadyA
perfume and cosmetics in Malaysia.
[8 marks]

12

LAM
LadyA perfumes and cosmetics

LAM
LadyA
Malaysian manufacturer

LAM
LAM

13

SECTION C
Answer the compulsory question from this section.
5.
(a) Identify one opportunity and one threat of technology changing (line 94) in the music industry to
musicians such as LadyA
[4 marks]
Opportunities
Video hosting websites e.g. Youtube would
enable LadyA to reach more of her target
market (e.g. low income young women)
She would portray an image of someone
who cares about her customers
She could use price discrimination by
selling video and audio CDS to affluent
customers at a higher price to recoup lost
revenues from free downloads/ video
hosting websites

Threats
Free music downloading and free or cheap
file sharing, although illegal meant that CD
sales were falling
Technology made music easily available e.g.
MP3 and smart phone apps
Consumers can create their own playlists
hence choosing specific songs as opposed to
music albums
Technology is not always reliable (e.g. video
hosting websites may be hacked etc

Marks 2+2
Award [1 mark] for each relevant opportunity/ threat identified and [1 mark] for an appropriate
explanation up to a maximum of [2 marks]

(b) With reference to the case study and items 3 and 4 below, explain the role played by social
networking sites (line 109) in promoting music stars like LadyA.
[4 marks]

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If LadyA uses the social networking sites that are more popular amongst the US Hispanics,
Facebook, Twitter, LinkedIn and Pinterest, shes likely to reach a large proportion of her target market.
This will enable her to inform them of new offerings such as new release music videos, upcoming
concerts, new perfume and cosmetic brands etc. She will meet the objectives of promotion and keep
her brand relevant and rejuvenated.
Article 3 indicates that the Latino population in the US remains young with the median age at 28
years old. Entertainment and media industries are identified as one of the seven economic sectors
expected to benefit most from Latino demographic change.
Communication through social media would help LadyA to reinforce her image as media
personality.

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(c) The US was rapidly changing demographically (line 61 and items 2 and 3). Discuss the likely impact
of these changes on the marketing strategies used by businesses such as LadyA Management
Limited.
[8 marks]
Marketing strategy is the goal of increasing sales and achieving a sustainable competitive
advantage.
Demographic Changes in the US population
Case study:
Percentage of American population that was Hispanic, although small, was growing rapidly, thus
expanding the Spanish-speaking American market. (line 61)
This demographic change was creating a negative political reaction in the US. (line 63-64)
Item 2:
Percentage change in Hispanic or Latino population between 2010 and 2013: 7.1%. This change
was much higher than that of non-Hispanics (1.5%) in the same period.
Hispanic or Latino population, as a percentage of total US population grew to 17.1% in 3013,
from 16.3% in 2010. 0.8% increase.
Item 3:
Between 2000 1nd 2011, Hispanics contributed to 50% of the total population growth in the US.
Between 2011 and 2016, Hispanics were estimated to contribute to 60% of the US population
growth.
Hispanics are the fastest growing ethnic segment expected to grow 167% from 2010 to 2050
compared to 42% for the total population.
Over 60% of the US Hispanic population is under 35; 75% is under 45.
Median age of the Latino population is 28 years old, nearly 10 years younger than the total
market median age of 37.
Likely impact of demographic changes on the 4Ps (marketing strategy). Please note that these can be
expanded to 7Ps (People, Physical evidence and Processes) especially for LAdyA service related offerings
such as concerts.
Positive impact
Price: Increasing economic buying power
Product: Expanding market: Increased demand
for LadyA products (music videos, concerts,
perfumes and cosmetics etc.)
Promotion: LAM can implement more Hispanicspecific marketing strategies
Place: Increase in no. of Hispanic internet users
means LAM can sell its products online, as well
as target shopping areas frequented by Spanish
speakers

Negative impact
New marketing strategies have to be developed
Product: The youthful are dynamic hence LadyA
offerings have to be dynamic as well
Product/ Promotion: Customer loyalty among
the young could fluctuate more rapidly than
among the older population segments
Higher threats of competition from other
Hispanic up and coming musicians
Product: Increased multiculturalism may mean
that the young Hispanics diversify their music
tastes outside the Hispanic-speaking population

16

Candidates have to use numerical data when describing demographic changes for them to reach
the top mark band (7-9)
(d) Using information contained in the case study and items 1-3, evaluate the three strategic options
proposed by LadyAs business consultants, Kersey & Joyce (K&J)
[12 marks]

Option 1: Move into the South American markets

Approaching her late 30s.
S. American market generally accepts older musicians
Hispanic background (ethnicity-based) would appeal to these customers
Ansoff: Market development- Medium risk strategy- LAM is already familiar with LadyA
products.
Possible actions:
New distribution channels- new, but costly opportunities
New targeted promotion- different social network dynamics
Prices could be differentiated from those in the US
Possible evaluation:
To what extent will rebranding (LadyA to Lady Alejandra lead to success?
Would LadyA be sending mixed signals with her mixed identity?
Will the success achieved in North America be replicated in South America?
Will the consumer characteristics in South America match those in North America?

Option 2: Develop more products under the LadyA brand and develop a global market.
Ansoff: Product development or (Related) diversification
High-risk strategy, but LadyA products will gain wider recognition
They can reach more market segments- higher sales,
Accessories will provide new revenue streams
Risks are spread over a wider range of products
Can be sold through same distribution channels
Can take advantage of family branding hence gaining instant recognition
Economies of scale e.g. in advertising
Possible evaluation points
Cost of introducing and managing new products and a wider portfolio
Family branding drawbacks e.g. bad publicity for one LadyA brand can damage all others
Can quality be maintained consistently across all brands?
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Will LAM lose focus on its core activities by spreading too wide?

Option 3: Re-brand herself

Lower her media profile for three years
Strengths
Charitable course may appeal to her fans
Ethical and caring image good for successful stars
Some South American countries are poor hence this strategy should be appealing to her fans
Talk shows and interviews
New brand identity- strong, mature, determined woman
Weaknesses
Three years is too long- her fans could have moved on
She will grow older hence less appealing to some of her younger female fans
Her competitors (e.g. J.Lo) may take over
Reduced revenue streams
Costly to set up NPOs.
These and other relevant strengths and weaknesses of the three options suggested by K&J should be
evaluated in context as LadyA needs to take action as she grows older. Supporting evidence from the
case study and items 1-3 should be referred to explicitly and with consistency throughout the response.
Award a maximum of [7-9 marks] where either the case study or items 1-3 have been used, i.e. only one
set of data.
If candidates discuss strategies and tactics without explicitly mentioning the contents of the three
options, award a maximum of [8 marks].
Marks should be allocated according to the mark bands on page 6.

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