Business Paper 1 Questions
APPLICATION - Product, rivals, raw materials
June 2023
Explain one advantage of starting a business as a private limited company.
The owners would have limited liability (1). This means that any debts are the responsibility of
the business (1). Therefore, the personal possessions of the owners will not have to be sold to
pay the debts of the business (1).
Explain one way the internet may affect where a small business chooses to locate
The business could choose a cheaper location (1). This is because the business can use
e-commerce (1). As a result, the business may not require a physical retail location (1).
Explain one way a small business could become more competitive.
A small business could improve the quality of the product (1). This would attract customers
because they think they are getting a better product (1). As a result, the business would gain a
better reputation than competitors (1).
Explain one advantage to a small business of meeting its legal obligations.
A small business would not get sued for breaking the law (1). This means the business would
not have to face financial consequences such as a fine (1). This will prevent the business from
having a negative image (1).
Explain one disadvantage to a small business of not paying its employees on time.
The employees may not be motivated (1). This means the
productivity of the employees will fall (1). Therefore, the business
may experience problems meeting customer orders (1).
Explain one advantage to a small business from using retained profit as a source of finance.
Retained profit is a cheap source of finance (1). This is because interest is not paid on retained
profit (1). Therefore, the business would not experience an increase in costs (1).
Discuss the impact on a small business from adapting existing products to develop new
business ideas.
● Adapting existing products can take less time and creative input than creating original
ideas (AO1b).
● Adapting existing products may not be as innovative as creating original ideas (AO1b).
● New ideas can be brought to market ahead of competitor products and therefore
provide a competitive advantage to a business (AO3a).
● Less innovative ideas may not fully meet changing customer needs. Therefore,
customers may choose a new product from a competitor that has filled a gap in the
market (AO3a).
, Analyse the impact on Lili Heating Ltd of using the internet to collect secondary market
research.
● Using the internet as a source of secondary market research is a fast and convenient
way to discover how many females live in Birmingham (AO2).
● The internet will not provide focused information to let Amelia know if there will be
enough demand for her plumbing and building services (AO2).
● Although she knows how many females live in Birmingham, it would be difficult to find
out how many of them own a property or would want a female plumber to work in their
homes (AO3a).
● Lili Heating Ltd will be in competition against other established plumbers. Amelia will
need to spend more time developing her target market to make sure there are enough
potential customers (AO3a).
STATE To award 1 mark there must be evidence of application.
The government will collect more tax if Lili Heating Ltd is successful (1). Taxes will be based on
the profits it makes from plumbing repairs (1).
In order to make the business more successful, Lili Heating Ltd is considering two options:
Option 1: offer a discounted price to female customers
Option 2: use social media to promote the business.
(c) Justify which one of these two options Lili Heating Ltd should choose.
June 2022
Explain one risk for an entrepreneur when starting a new business.
An entrepreneur may have to give up their job to start the business (1). This could lead to them
losing regular income from wages/salary (1). This will lead to a lack of security in their lives (1).
Explain one way a small business could add value to a product
A business could add value through developing a unique selling point (1). This will differentiate
the product from its rivals (1). Therefore, customers will pay extra for the product as they feel
the product is better than the competition (1)
Explain one disadvantage to a small business of using an overdraft as a source of business
finance
Overdrafts can be an expensive source of finance (1). The bank may charge a high rate of
interest for the overdraft facility (1). This will lead to an increase in costs for the business (1).
Explain one impact on a small business of an increase in unemployment.
APPLICATION - Product, rivals, raw materials
June 2023
Explain one advantage of starting a business as a private limited company.
The owners would have limited liability (1). This means that any debts are the responsibility of
the business (1). Therefore, the personal possessions of the owners will not have to be sold to
pay the debts of the business (1).
Explain one way the internet may affect where a small business chooses to locate
The business could choose a cheaper location (1). This is because the business can use
e-commerce (1). As a result, the business may not require a physical retail location (1).
Explain one way a small business could become more competitive.
A small business could improve the quality of the product (1). This would attract customers
because they think they are getting a better product (1). As a result, the business would gain a
better reputation than competitors (1).
Explain one advantage to a small business of meeting its legal obligations.
A small business would not get sued for breaking the law (1). This means the business would
not have to face financial consequences such as a fine (1). This will prevent the business from
having a negative image (1).
Explain one disadvantage to a small business of not paying its employees on time.
The employees may not be motivated (1). This means the
productivity of the employees will fall (1). Therefore, the business
may experience problems meeting customer orders (1).
Explain one advantage to a small business from using retained profit as a source of finance.
Retained profit is a cheap source of finance (1). This is because interest is not paid on retained
profit (1). Therefore, the business would not experience an increase in costs (1).
Discuss the impact on a small business from adapting existing products to develop new
business ideas.
● Adapting existing products can take less time and creative input than creating original
ideas (AO1b).
● Adapting existing products may not be as innovative as creating original ideas (AO1b).
● New ideas can be brought to market ahead of competitor products and therefore
provide a competitive advantage to a business (AO3a).
● Less innovative ideas may not fully meet changing customer needs. Therefore,
customers may choose a new product from a competitor that has filled a gap in the
market (AO3a).
, Analyse the impact on Lili Heating Ltd of using the internet to collect secondary market
research.
● Using the internet as a source of secondary market research is a fast and convenient
way to discover how many females live in Birmingham (AO2).
● The internet will not provide focused information to let Amelia know if there will be
enough demand for her plumbing and building services (AO2).
● Although she knows how many females live in Birmingham, it would be difficult to find
out how many of them own a property or would want a female plumber to work in their
homes (AO3a).
● Lili Heating Ltd will be in competition against other established plumbers. Amelia will
need to spend more time developing her target market to make sure there are enough
potential customers (AO3a).
STATE To award 1 mark there must be evidence of application.
The government will collect more tax if Lili Heating Ltd is successful (1). Taxes will be based on
the profits it makes from plumbing repairs (1).
In order to make the business more successful, Lili Heating Ltd is considering two options:
Option 1: offer a discounted price to female customers
Option 2: use social media to promote the business.
(c) Justify which one of these two options Lili Heating Ltd should choose.
June 2022
Explain one risk for an entrepreneur when starting a new business.
An entrepreneur may have to give up their job to start the business (1). This could lead to them
losing regular income from wages/salary (1). This will lead to a lack of security in their lives (1).
Explain one way a small business could add value to a product
A business could add value through developing a unique selling point (1). This will differentiate
the product from its rivals (1). Therefore, customers will pay extra for the product as they feel
the product is better than the competition (1)
Explain one disadvantage to a small business of using an overdraft as a source of business
finance
Overdrafts can be an expensive source of finance (1). The bank may charge a high rate of
interest for the overdraft facility (1). This will lead to an increase in costs for the business (1).
Explain one impact on a small business of an increase in unemployment.
