CAIE IGCSE Business Studies 6.4 Business and Ethical Issues Questions
Use this ethical-issues page to define ethical behaviour, explain benefits or costs and justify whether ethics should affect decisions.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Define ethical business as making decisions based on moral codes or behaviour.
- Explain how ethical choices affect demand, reputation, costs or supplier relationships.
- Justify whether firms should be concerned about issues such as child labour.
Covered syllabus points
Question 1
[Maximum number: 6]
CFG is a social enterprise. It buys cocoa beans from local farmers and then uses the beans to make chocolate. Being ethical is important to the business. CFG has developed a new chocolate bar. The Marketing Manager plans to use skimming as its pricing method, and retailers as its distribution channel for the new product. He knows there are many legal controls over marketing that might affect a business.
Do you think being ethical will always lead to lower profit for a business? Justify your answer.
Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for justified decision as to whether being ethical will always lead to lower profit for a business.
Points might include:
- Limited/fewer sources of materials [k] leading to less output [an]
- Higher cost of materials [k] leading to higher variable costs/cost of goods [an] which lowers gross profit margin [an]
- Workers may have to be paid more/fair pay [k] increasing labour costs [an]
- May take time to source ethical supplies [k] which could delay production [an]
- Good image/reputation [k] so can charge high(er) prices/ lead to customer loyalty [an]
- High(er) demand / increase sales / enter new market / more customers [k] which could increase revenue [an]
- Help recruit/motivate/retain workers [k] leading to lower absenteeism/increased productivity [an]
- Investors more likely to invest [k]
- Can help create better supplier relations (by paying a fair price) [k]
- Less opposition from pressure groups [k]
This is a general question so there are no marks for application.
Increase cost can be awarded as [k] once where candidates do not refer to specific examples of costs.
Do not credit answers which relate to the costs of being unethical as this is NAQ.
Justification might include:
Being ethical could mean having to pay more to suppliers [k] increasing variable costs [an]. However, this could improve the business's reputation [k] allowing them to increase prices [an]. Being ethical will not always mean lower profit because a better reputation is likely to attract more customers [eval], and the extra revenue gained could cover the costs increasing profit overall [eval].
Question 2
[Maximum number: 6]
PCY provides insurance services for businesses such as farms and factories. Being ethical is important to PCY. The business has 4 offices and 500 employees. Managers use different leadership styles. The Managing Director is planning to change how PCY is organised and managed. He said: 'I want to reduce communication barriers within the business. Delegation will be encouraged. The span of control could change.'
Explain two possible reasons why being ethical is important to PCY.
Reason 1:
Explanation:
Reason 2:
Explanation:
Award 1 mark for identification of each relevant reason (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
- Increased/retain sales / demand / customers [k] from farms / factories [app] leading to higher revenue [an]
- Build / better reputation / brand image [k] leading to better customer loyalty / sales / competitive advantage [an] for its insurance [app]
- Help attract / motivate / retain employees [k] improving efficiency / better quality of service / less labour turnover [an] from its 500 employees [an]
- Investors may be more likely / willing to invest [k] increasing the amount of capital / funds [an]
Other appropriate responses should also be credited.
To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for this question:
- 4 offices
- 500 employees
- Insurance (services)
- Business customers / farms / factories
- Leadership style
- Communication barriers
- Span of control
- Delegation
Other appropriate examples can be credited.
Some points can be [k] or [an] but only once e.g. customer loyalty
Do not award:
Comply with laws/less risk of legal as being ethical is different to legal.
Examples of being unethical Ways to be ethical.
Question 3
[Maximum number: 6]
ACP manufactures computers. Being ethical is important to ACP. The business employs 3000 workers in its factory. ACP imports 65% of its raw materials. As internal users of accounts, the directors plan to analyse ACP's financial performance using profitability ratios. The Finance Director thinks making a profit is more important for a business than managing its cash flow.
Explain one benefit and one limitation to ACP of being ethical.
Benefit:
Explanation:
Limitation:
Explanation:
Award 1 mark for identification of each relevant benefit/limitation (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
Benefits:
- Good image/good reputation/customer loyalty [k] so customers more willing to pay high prices [an] for its computers [app]
- High/higher demand/sales [k] which can help increase revenue [an]
- Can help recruit/motivate/retain workers [k] reducing recruitment costs [an] as the business has 3000 employees [app]
- Better supplier relations (as pay a fair price) [k] which can help ensure the necessary supply to maintain production [an]
- Investors more likely to invest [k]
- Less opposition from pressure groups [k]
Limitations:
- Limited/fewer sources of materials [k] which may lead to less output [an] as already imports 65% of its raw materials [app]
- May have to pay more to suppliers [k] leading to higher variable costs/cost of goods sold [an]
- Workers may have to be paid more [k] at the factory [app] increasing labour costs [an]
- Higher costs [k] could lead to higher prices [an]
Other appropriate responses should also be credited.
To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for this question:
- 65 % / import
- Cash flow
- Raw materials
- Computers
- 3000 employees
- Factory
- Production/manufacture
- Profit is important/profitability ratios
Other appropriate examples can be credited.
Some points can be awarded as [k] or [an] but do not award the same point twice.
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