Cambridge IGCSE™: Business Studies 0450/22 May/June 2020

Cambridge IGCSE™
BUSINESS STUDIES 0450/22

Paper 2 Case Study 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 14 printed pages.
© UCLES 2020 [Turn over

0450/22 Cambridge IGCSE – Mark Scheme May/June 2020
PUBLISHED
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.
Marks awarded are always whole marks (not half marks, or other fractions).
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.
Rules must be applied consistently e.g. in situations where candidates have not followed
instructions or in the application of generic level descriptors.
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).
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.
© UCLES 2020 Page 2 of 14

PUBLISHED
Question Answer Marks
1(a) Explain one benefit and one problem for ES of taking over other 8
businesses.
Award 1 mark for each relevant benefit/problem (maximum of two):
Relevant benefits might include:

• Assets already set up for use – can use existing scooter factories and
skilled employees
• Makes it quicker to grow – as the existing production facilities can be
used to increase the output of scooters – faster than setting up own
factories
• Have access to ready trained/skilled staff
Relevant problems might include:

• High cost of buying other business – may need to sell additional shares
on the stock exchange
• May be difficult integrating the two companies – as the way of working
may be very different in the smaller scooter businesses – and
employees may not like the changes – leading to less efficiency
• More difficult to control larger business – many more skilled employees
in the business – possible diseconomies of scale
Award a maximum of 3 additional marks for each explanation of the benefits

and problems of growing by taking over other businesses – one of which
must be applied to this context.
For example:
The cost of buying other companies is high (1) and ES will have to raise large
amounts of funds to allow them to do this (1). As a public limited company
(app), it could sell additional shares to raise the finance, but this may lead to
the existing shareholders losing some control over the business (1).

PUBLISHED
1(b) Consider the financial information in Appendix 1. Which company 12

should ES take over? Justify your answer using appropriate ratios.
Level Description Marks
Sound application of knowledge and understanding of

relevant business concepts using appropriate
terminology.
Detailed discussion of both companies.

3 9–12
Well-justified recommendation.
Candidates discussing both companies in detail, in

context and with well-justified recommendation including
why the alternative company was rejected should be
rewarded with the top marks in the band.

terminology.
Detailed discussion of at least one company.

2 5–8
Judgement with some justification/some evaluation of
choice made.
Candidates discussing both companies in detail and

applying it to the case should be rewarded with the top
marks in the band.
Limited application of knowledge and understanding of

relevant business concepts.
Limited ability to discuss each company with little/no

explanation.
1 1–4
Simple judgement with limited justification/limited
evaluation of choice made.
Candidates outlining both companies in context should

be rewarded with the top marks in the band.
0 No creditable response. 0

PUBLISHED
1(b) Relevant reasons might include:
• Revenue $300m lower than FGH ($400m for

FGH company - $100m for ABC company)
• Gross profit = $50m
• GPM = 50%
• Profit = $10m
ABC company • Profit Margin = 10%
• ROCE is 5% lower than FGH but still good
return on investment (25% for FGH – 20% for
ABC)
• Liquidity is good and shows that ABC can easily
pay any short-term liabilities
• Gross profit = $240m (Revenue $400m – Cost

of sales $160m)
• GPM = 60%
• Profit = $30m
• PM = 7.5%
FGH company • Profit $20m higher than ABC
• Current ratio is higher than ABC (ABC current
ratio of 2 while FGH current ratio is 3)
• Liquidity is too high and is not making good use
of its current assets. There may be too much
cash being held in the business.
Justification might include:

• ABC as profitability higher than FGH even
though GPM is lower overall profitability is
higher. Liquidity is also better for ABC as FGH
has too high an amount of current assets to
Recommendation
current liabilities with a current ratio of 3.
• FGH as the actual profit is higher than for ABC
and GPM higher showing if improve control of
expenses then profitability will be higher as well.
ROCE is 25%, higher than ABC by 5%.

PUBLISHED
2(a) Explain four ways a business plan can be useful. 8
Award 1 mark for each relevant way (maximum of four ways):
Relevant ways might include:

• Helps gain a bank loan – shows the business is likely to be profitable
and repay the loan
• Organises thoughts about resources needed – identify types of workers
need to recruit
• Can plan and budget for resources needed- e.g. to budget for new
production machinery
• Financial documents will help to show expected returns – to see if it will
bring the return expected by shareholders
Award a maximum of 1 additional mark for each explanation of the way a

business plan can be used.
For example:
Forecast financial documents will show potential profit to be made (1) can
see if it will give a satisfactory return on the investment. (1)

PUBLISHED
2(b) ES has been considering the following three methods of promotion for 12
its products in export markets. Which method should ES choose?
Justify your answer.
• Advertise on national television
• Advertise on ES website
• Display its products in shopping malls

terminology.
Detailed discussion of two or more methods to promote

ES’ products.
3 9–12
Well-justified recommendation.
Candidates discussing the three methods in detail, in

context and with well-justified recommendation including
why the alternative methods were rejected should be

terminology.
Detailed discussion of at least one method.

2 5–8
choice made.
Candidates discussing two or more methods in detail

and applying it to the case should be rewarded with the
top marks in the band.

Limited ability to discuss the methods to promote the

products with little/no explanation.
1 1–4
Candidates outlining the three methods to promote the

products in context should be rewarded with the top
marks in the band.

PUBLISHED
2(b) Relevant points might include:
• Advert for scooters will go out to millions of

people
• Scooters can be shown in very favourable way
• Can reach a target audience for scooters if
shown during programmes likely to be watched
Advertise on
by these target customers e.g. sports
national television
programmes
• Very expensive form of advertising
• Younger consumers may not watch as much TV
as older people so may not reach these
consumers
• Large amount of information can be posted

• Cheap way to advertise
• Can include videos of the scooters
Advertise on ES • Internet searches may not highlight the website
website at the start of the search list and therefore it is
missed
• Internet access may be limited in some
countries where scooters are being exported
• Provides a lot of information

Display its • Can also be persuasive with scooter to look at
products in and sit on
shopping malls • Restricted to a relatively small number of
consumers in the mall

• National TV as the scooters will be seen by the
mass market and will not be seen by many
people in shopping mall displays.
• Website useful for advertising when other forms
of advertising have raised awareness of the
scooters such as after the scooter has been
Recommendation
seen in a mall display.
• Displays in shopping malls will be most useful as
potential customers can sit on the scooters and
see how comfortable they are. This may make
people who have not even thought about buying a
scooter consider them whereas advertisements in
television and on websites may be ignored.

PUBLISHED
3(a) Explain two benefits to ES of higher productivity. 8
Award 1 mark for each relevant benefit (maximum 2).
Relevant benefits might include:

• Lower unit costs – increasing gross profit margin - higher profit
• Lower prices – as each scooter costs less to produce – prices are more
competitive with other manufacturers - increased sales
• Increased output – more scooters available to export – increased
revenue
• Output per worker higher – able to increase wages/offer financial
rewards – which could increase motivation – lower labour turnover
Award a maximum of 3 additional marks for each explanation of the benefits

of higher productivity – one of which must be applied to this context.
For example:
Output per worker is higher (1) so ES may be able to offer financial rewards
than just time wage rate payments (app) which can result in more highly
motivated production workers (1) making them less likely to leave and
consequently ES will have lower recruitment costs. (1)

PUBLISHED
3(b) Consider three methods of motivation ES could use for its production 12
workers. Which is the best method for ES to choose? Justify your
answer.

terminology.
Detailed discussion of two or more methods.

3 9–12
Well-justified conclusion.
Candidates discussing three methods in detail, in

context and with well-justified conclusion including why
the alternative methods were rejected should be

terminology.
Detailed discussion of at least one method.

2 5–8
choice made.
Candidates discussing two or more methods in detail


Limited ability to discuss the methods with little/no

explanation.
1 1–4
Candidates outlining three methods in context should

be rewarded with the top marks in the band.

PUBLISHED

• Job rotation – moves workers around the production line to carry out
different tasks so makes the job less boring – but the actual tasks
may still be monotonous.
• Job enlargement – adds tasks to the job and therefore the job becomes
more interesting – worker may feel more important as trained to carry out
additional tasks – but worker may not feel able to carry out the additional
task – may not want extra responsibility.
• Increased wage rates – even higher than the legal minimum wage
than they are at present - Taylor states that increased wages will
increase motivation as ‘money is the main motivator’ – however,
Herzberg would argue it is only a temporary motivator and increased
motivation will not last.
• Introduce piece rate – wages paid will increase the higher the output, so
workers will be motivated to increase their output – however, if work is
rushed quality might suffer leading to a poor reputation for the company.
• Pay a bonus – may be paid individually or as a team – higher pay if the
production team increase output – may cause disagreements if only
some of the team are working hard – may be seen as unfair.
Judgement might include:

• Higher pay will only motivate production workers for a short time as the
job is still boring on the flow production line. It might be better to use
job enlargement to add tasks to the job the job of making scooters to
make it more interesting and maintain increased motivation for a longer
period of time. It may also cost less as may only need additional training
and not higher wages to be paid

PUBLISHED
4(a) Explain how the following four legal controls may affect ES. 8
• Control over misleading promotion

• Control over faulty products
• Control over location decisions
• Control over pollution
Award one mark for each effect (maximum of four).
Relevant legal controls might include:

• Misleading promotion: restrictions on claims in adverts about the
speed scooters can go or fuel consumption
• Faulty products: consumers have the right to return them to have
your money back if the scooter engine has a fault
• Location – restrictions on where to expand the scooter factory
• Pollution – emissions from scooters may mean production has to
change
Award a maximum of 1 additional mark for each effect applied to this

context.
For example:
Environmental laws may restrict pollution from exhaust fumes (1) this may
mean ES has to change the engines of its scooters which may increase
costs (app).

PUBLISHED
4(b) Consider the effect on ES of the following two economic changes in 12

country Z. Which change is likely to have the biggest effect on ES’s
profit? Justify your answer.
• Increasing unemployment
• Increasing inflation

terminology.
Detailed discussion of both economic changes.

3 9–12
Well-justified conclusion.
Candidates discussing both economic changes in detail,

in context and with well-justified conclusion including
why the alternative change was rejected should be

terminology.
Detailed discussion of at least one economic change.

2 5–8
choice made.
Candidates discussing both economic changes in detail


Limited ability to discuss the economic changes with

little/no explanation.
1 1–4
Candidates outlining both economic changes in context

should be rewarded with the top marks in the band.

PUBLISHED
• Lower incomes
• Lower sales on expensive items such as
scooters
• However, if scooters are bought instead of cars
Increasing then sales may be higher
unemployment • Easier to recruit employees as larger pool of
unemployed workers available to select the
additional 100 production workers
• Less pressure on wage rate increases to be well
above the legal minimum wage rate
• Higher supplier costs of components for

scooters
• Price of scooter may have to increase –
reducing sales
• Less competitive if imported scooters do not
Increasing
have higher prices
inflation
• Pressure for wage to be increased to much
higher than the legal minimum wage rate –
increasing costs
• But all domestic manufacturers face the same
problems to so may not be less competitive

• Increasing unemployment may lead to lower
wage costs and if revenue from the sale of
scooters also rises then profit will increase.
• Increasing inflation may make it easier for ES to
Conclusion increase prices on its scooters as consumers
expect prices to rise, so revenue increases.
Some of its costs will rise as inflation increases
but if ES does not increase wages, as
unemployment has now started to increase,
then profit may still increase.

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Cambridge IGCSE™

BUSINESS STUDIES 0450/22

This document consists of 14 printed pages.

© UCLES 2020 [Turn over

Generic Marking Principles

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

GENERIC MARKING PRINCIPLE 2:

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

GENERIC MARKING PRINCIPLE 4:

GENERIC MARKING PRINCIPLE 5:

GENERIC MARKING PRINCIPLE 6:

© UCLES 2020 Page 2 of 14

Question Answer Marks

Award 1 mark for each relevant benefit/problem (maximum of two):

Relevant benefits might include:

Relevant problems might include:

Award a maximum of 3 additional marks for each explanation of the benefits

© UCLES 2020 Page 3 of 14

Question Answer Marks

1(b) Consider the financial information in Appendix 1. Which company 12

Level Description Marks

Sound application of knowledge and understanding of

Detailed discussion of both companies.

Candidates discussing both companies in detail, in

Sound application of knowledge and understanding of

Detailed discussion of at least one company.

Candidates discussing both companies in detail and

Limited application of knowledge and understanding of

Limited ability to discuss each company with little/no

Candidates outlining both companies in context should

© UCLES 2020 Page 4 of 14

Question Answer Marks

1(b) Relevant reasons might include:

• Revenue $300m lower than FGH ($400m for

• Gross profit = $240m (Revenue $400m – Cost

Justification might include:

© UCLES 2020 Page 5 of 14

Question Answer Marks

2(a) Explain four ways a business plan can be useful. 8

Award 1 mark for each relevant way (maximum of four ways):

Relevant ways might include:

Award a maximum of 1 additional mark for each explanation of the way a

© UCLES 2020 Page 6 of 14

Question Answer Marks

Level Description Marks

Sound application of knowledge and understanding of

Detailed discussion of two or more methods to promote

Candidates discussing the three methods in detail, in

Sound application of knowledge and understanding of

Detailed discussion of at least one method.

Candidates discussing two or more methods in detail

Limited application of knowledge and understanding of

Limited ability to discuss the methods to promote the

Candidates outlining the three methods to promote the

© UCLES 2020 Page 7 of 14

Question Answer Marks

2(b) Relevant points might include: