Edexcel IGCSE Economics 1.2.4 business competition

AO2 (4 marks)/AO3 (4 marks)/AO4 (4 marks)

A02 and A03

- Expanding a business means serving a higher number of customers, to potentially increase profits

- Becoming a larger firm may mean NT Massage is able to make higher profits because it can charge higher prices to the tourists and business people in the new shops

- It may have a large increase in customer numbers because there would be shops in busier areas of Hong Kong, this would lead to an increase in revenue and therefore, possibly profits

- By having a chain of shops, advertising at hotels and targeting the 7.5 million population of Hong Kong as well as tourists/business people, NT Massage would be spreading its risks, rather than just relying on the original location and local residents

- Due to its success as a small business, NT Massage may have more access to finance to be able to grow the firm

- It may be possible for NT Massage to benefit from economies of scale, such as being able to spread advertising costs

A04

- However, NT Massage currently offers a very traditional service which may be negatively affected if the firm expands

- The long-standing customers may not like changes being made to the firm, especially if they value the traditional approach

- It may experience diseconomies of scale such as difficulty in coordinating and controlling the firm in more than one location, especially if Mei and her family are only used to having one shop

- There would be a lot of competition located near to the proposed new locations, meaning that it would be more difficult to attract custom

- It would require time and money to grow the firm, meaning that it may be a long time before any profit is made

- Raising finance may be difficult for a small business such as NT massage

- This could cause further problems for the existing business

- Therefore, it may depend on the strength of existing competitors, the ability of NT Massage to advertise successfully and the volume of tourism/business from which to attract potential custom

Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-4

- Demonstrates isolated elements of relevant knowledge and understanding; may lack development of relevant points. Limited application of economic terms, concepts, theories and calculations (AO2).

- Information presented will lack selectivity and organisation. Chain of reasoning may be attempted. Interpretation of economic information will be limited, with a lack of analysis of issues (AO3).

- Only offers one viewpoint, meaning there is an unbalanced and incomplete evaluation, showing limited understanding and awareness. A judgement or conclusion is unlikely to be attempted (AO4).

Level 2

5-8

- Demonstrates partial selectivity and some accurate knowledge and understanding by developing some relevant points. Partial application of economic terms, concepts, theories and calculations (AO2).

- Information presented will demonstrate some selectivity and organisation. Chain of reasoning will be present but may be limited. Interpretation of economic information will be good, with some analysis of issues (AO3).

- Offers more than one viewpoint but the argument may lack balance, leading to an evaluation that may not demonstrate full understanding and awareness. A judgement or conclusion is attempted, but may not be fully supported (AO4).

Level 3

9-12

- Demonstrates specific and accurate knowledge and understanding by developing relevant points. Appropriate application of economic terms, concepts, theories and calculations (AO2).

- Information presented will demonstrate excellent selectivity and organisation. Chain of reasoning will be coherent and logical. Interpretation of economic information will be excellent with a thorough analysis of issues (AO3).

- Offers more than one viewpoint. The argument is well balanced and coherent, leading to an evaluation that demonstrates full understanding and awareness. A supported judgement or conclusion is present (AO4).