Sample Mark Scheme

Level 5 International Business

Economics and Markets

Section A – 20 marks
(Short answer questions: 4 x 5 marks each = 20 marks total)

1 (5 marks)
Discuss the advantages and disadvantages of the use of desk research in international market research.
Q Indicative Content Total
1 Disadvantages/criticisms
• Incomplete information: suppliers of secondary data may limit availability in order to charge
higher fees for complete data set
• Timeliness: fast-changing industries mean that secondary data can quickly lose relevance
• Relevance: secondary data may not relate directly to the research question, or be in a form that
does not relate directly to the question
• Quality: may be relatively weak. Primary data collection is controlled and managed by the
researcher: the same level of control and management might not have been applied to the
secondary data

Advantages
• Ease of access: relatively easier than collection of primary data. Convenience and increasingly
standardised methods of access and manipulation
• Cost: relatively low
• Clarification: may help to clarify the research question. This can be particularly useful when used
alongside primary research

Other relevant material should be credited. 5

Mark Allocation Guidance
Up to 1 mark can be allocated per advantage or disadvantage that is discussed to a maximum of 5 marks.
2 (5 marks)
It has been argued that international free trade should be restricted where possible.
Propose five arguments to support this statement.
Q Indicative Content Total
2 Arguments against international free trade.
• Economic diversification: reliance on a small number of industries has a number of
disadvantages, including exposure to price fluctuations and exposure if the goods/services have
a low-income elasticity of demand.
• Government revenue: import duties raise revenue for government (but, typically, this is a
relatively small proportion of total government revenues)
• Balance of payments: restrictions on imports can help the current account (however, in the long
term it could lead to retaliation)
• Infant industries: infant industries can struggle in the face of international competition.
Protection, at least in the short term, can help then to gain comparative advantage
• Senile industries: declining or inefficient industries may require significant investment to make
them efficient again. Protection for such industries can encourage investment in such industries.
• Cultural identity: protection against commercialisation or ‘Americanisation’ (this is not really an
economic argument)
• Protection against ‘dumping’: sale at below cost to cause other producers to become
unprofitable.
• Environmental: use of natural resources of raw materials to export. Countries with strict
environmental controls may not wish to accept imports from those with less stringent
environmental controls.

Other relevant material should be credited. 5

Mark Allocation Guidance
Award 1 mark per argument identified and explained up to a maximum of 5 marks

3 (5 marks)
Discuss three operations that the World Trade Organisation (WTO) undertakes to operate its global system of
trade rules.
Q Indicative Content Total
3 • Negotiation: acts as a forum in which trade agreements can be discussed and agreed
• Implementation and monitoring: requires governments to make trade policies transparent by
notifying the WTO about legal and regulatory measures
• Dispute settlement: acts as a forum in which disputes can be discussed and settled
• Developing countries: supports the needs of developing countries. Helps to build trade capacity.
Undertakes technical cooperation missions to support implementation in developing countries
• Outreach: maintains dialogue with government, international organisations and non-
governmental organisations 5
Mark Allocation Guidance
1 mark per operation fully discussed, up to a maximum of 5 marks.
1 mark for identification only of 3 operations.
4 (5 marks)
Explain the advantages and disadvantages of currency devaluation with reference to international trade.
Q Indicative Content Total
4 Advantages
• Exports cheaper: exports more competitive as they appear cheaper to foreigners. This should
increase demand for exports. Assets (e.g. property) may also become more attractive to
foreigners.
• Imports more expensive: reduced demand for imports. May also encourage citizens to avoid
imports, which now appear more expensive.
• Improvement in current account (this is implied in the requirement, but award credit anyway):
exports more competitive and imports more expensive: should reduce current account deficit

Disadvantages
• Inflation: imports are more expensive and cause ‘cost push’ inflation. Increased aggregate
demand causes ‘demand pull’ inflation. Cheaper exports mean that manufacturers have less
incentive to cut costs, leading to ‘cost push’ inflation (if there is spare capacity in the economy,
then devaluation might not have an inflationary effect)

Disadvantages not in the context of international trade

• Wages: workers may be encouraged to seek employment overseas
• Global economy: if wider global economy is in recession, devaluation may not be sufficient to
boost export.
• Competitiveness: if devaluation is simply an aim to meet a certain exchange rate, then it may be
inappropriate for an economy

Advantages not in the context of international trade

• Increased aggregate demand: assuming aggregate demand is relatively elastic, higher exports
and lower imports should lead to an increase in aggregate demand
• Competitiveness: devaluation can help to improve competitiveness and to boost economic
growth.

Other relevant material should be credited. 5

Mark Allocation Guidance
1 mark can be allocated per advantage or disadvantage explained in the context of international trade, up
to a maximum of 5 marks.
 Section B – 30 marks
(Short answer questions: 3 x 10 marks each = 30 marks total)

5 (10 marks)
The European Single Market is a functioning single market that seeks to guarantee the free movement of
capital, labour, goods and services.
a. Identify an example of a functioning Single Market (in addition to the European Single Market). (1 mark)
b. Discuss one economic advantage of functioning single markets. (3 marks)
c. Compare and contrast a free trade area with a functioning single market. (6 marks)

Q Indicative Content Total

5a Eurasian Economic Union
CARICOM
Gulf Cooperation Council (accept despite dispute as to ‘functioning’ nature) 1
Mark Allocation Guidance
1 mark for example.
5b Single markets should promote the efficient allocation of economic resources.
• Increased prosperity: functioning single markets secure higher rates of GDP growth than other
forms of economic co-operation.
• Lower prices: greater competition (arising from ‘opening up’ of markets that were previously
closed) have led to lower prices for goods and services
• Reduced transaction costs: single framework for regulation reduces transaction costs
• Reduced tax burden: greater competition has driven down cost of provision of public services,
thereby reducing burdens on taxpayers
• Free movement of labour: greater efficiency in the allocation of productive labour and in the
setting of labour prices 3
Mark Allocation Guidance
1 mark per advantage identified
A further 1-2 marks for discussed advantage depending on detail.
5c Free trade area: a trading bloc whose member countries have signed a free trade agreement
(FTA). Economic cooperation under FTAs includes the reduction of trade barriers, price controls
and quotas. Likely to exclude customs union.
Functioning single market: an agreement or association of countries that trade with each other
without restriction. All or most trade barriers will have been removed. There will also be common
policies on product regulation, freedom of movement of the factors of production and of goods
and services. Will typically include customs union. 6
Mark Allocation Guidance
3 marks for discussion or FTA
3 marks for discussion of FSM

6 (10 marks)
a. Explain two key drivers of globalisation in the context of international trade. (4 marks)
b. Analyse the effects that the ‘counter culture’ to globalisation has had on international trade. (6 marks)
Q Indicative Content Total
6a • ICT development: telecommunications, particularly the proliferation of the internet and mobile
‘phone technology 4
 • Multinationals/supranationals: reductions in trade barriers. Opening up of current and capital
accounts e.g. GATT, WTO, trading blocs. Influence of large companies on domestic
governments and on supranational organisations
• Urbanisation: reduction in heterogeneity of populations. Increasing mobility to labour
• Transportation: improvements in transport networks and means of transport have reduced
transportation times and costs e.g. containerisation, air travel, jet engine
• International consumers: ‘Americanisation’ and commercialisation have led to a reduction in
heterogeneity of populations
• Migration: movement of people has led to a reduction in the heterogeneity of populations.
Similarities in tastes and preferences have emerged.
• Economic cycle: cyclical nature of economic activity means that countries are interconnected
anyway e.g. recession in major domestic economy causes recession in other countries.
Globalisation is, to some extent, inevitable
• Mobility of capital: reduction in capital barriers. Businesses can raise finance across borders.
Mark Allocation Guidance
1 mark per driver of globalisation identified, 1 further mark for explanation, up to a maximum of 4 marks
6b Advantages/successes
• Counter hegemonic globalisation: globalisation can be harnessed to bring about more equitable
distributions of wealth and power. ‘Bottom up’ globalisation
• Global social movements: e.g. labour movement, women’s movement. Resistance to perceived
diminution in working conditions and employment rights
• Environmentalism: use of governance structures to resist perceived negative effects of
globalisation.

Disadvantages/criticisms
• Evidence: contradictory evidence on the effects of globalisation. For example, increase in
universal suffrage and increase in per capita income appears to contradict some of the
assertions made by the ‘counter culture’
• Support: populations in many relatively poorer nations have been relatively accepting and
supportive of globalisation
• Free-trade: barriers to free trade are criticised as a cause of poverty in relatively poorer nations.
‘Counter culture’ criticisms of organisations such as the WTO, which work to improve free trade
conditions, appear to be contradictory. 6
Mark Allocation Guidance
1-2 per point, depending on depth, up to a maximum of 6 marks

7 (10 marks)
Evaluate the difference between visible and invisible trade. Use examples to support your answer.
Q Indicative Content Total
7 The current account is divided into two sections: visible trade and invisible trade.

Visible trade is the trade in physical goods such as:

• cars, oils, raw materials, components, other manufactured goods, etc. and the balance between
those that are exported and imported is often called the trade balance or the balance of trade.

Invisible trade is transactions in non-tangible goods. It comprises:

• Services including sea and air transport, tourism, consultancy and financial services
• Interest profits and dividends which are the annual flow of interest payments, profits from
businesses and dividends payments on shares coming into a country from its lending and 10
 investments overseas less the payments of interest, profit and dividends due to foreign banks,
companies and investments flowing out of the country.
• Transfers of funds to or receipts from other countries for non-trading and non- commercial
transactions. The main sources of these flows are governments. For instance the UK government
transfers grants to developing countries, subscriptions to international organisations like the UN
and net payments to the EU.

A basic pass would include:

• Identification of the meaning of visible trade and invisible trade, respectively
• Some understanding of the types of goods/services that are included in each

A better answer would include:

• An explanation of the meaning of visible trade and invisible trade
• A developed understanding of the types of goods/services that are included in each
• The three elements of invisible transactions
Mark Allocation Guidance
1-3 marks per difference, depending on the depth and use of appropriate examples, up to a maximum of
10 marks.

Section C – 50 marks
(Essay questions: 2 out of 3 x 25 marks each = 50 marks total)

8 (25 marks)
Pelicans Corporation is a large company that was founded in China. It operates in South East Asia. The
company has decided to expand into North America. The directors of Pelicans Corporation have identified a
potential joint venture partner for market entry into North America.
a. Discuss three other potential market entry routes for Pelicans Corporation. (6 marks)
b. Critically analyse the considerations for Pelicans Corporation when pursuing the joint venture. (19 marks)
Q Indicative content Total
8a Other market entry routes

Exporting
▪ Direct
▪ Indirect: agents and distributors
▪ Piggybacking
Licensing
▪ Franchising
▪ Turnkey contracts
▪ Contract manufacturing
Strategic alliances
Foreign direct investment
Direct marketing 6
Mark Allocation Guidance
1-2 marks per point discussed, depending on depth, up to a max of 6 marks
8b Advantages 19
 • Access to knowledge, specialised technology and labour: such access may be restricted and/or
costly under other circumstances
• Flexibility: joint ventures can offer short-term relationships and/or arrangements that offer
greater flexibility than might be available under other circumstances
• Expansion: joint ventures can offer opportunities to develop into new markets/expand activities
beyond core operations
• Shared risks and costs: nature of joint ventures mean that risks and costs are shared. Risk of
failure is also shared in a similar manner
• Strategic relationships: whilst joint ventures are often temporary and short-term in nature, they
can be used as a basis by which longer term relationships can be developed and established
• Access to markets and distribution networks: trade barriers and controls might otherwise
restrict such access. Products/services can sometimes be marketed directly to partner(s)
customers.
• International trade barriers: can sometimes be overcome by partnering with an organisation
that has access to a market that might otherwise be closed or protected

Disadvantages
• Culture: differing organisational/national/regional cultures may lead to management
difficulties
• Restriction of flexibility: restrictions in joint venture relationships might have an effect on core
business activities
• Lack of clarity: if objectives and responsibilities are not specified with clarity, misunderstandings
and difficulties can arise
• Nature of relationship: many joint ventures have unbalanced involvements. Organisational
pressures and difficulties can emerge as a result of unbalanced joint venture relationships
• Exit costs: withdrawal from joint venture relationships can result in the creation of substantial
exit costs
• Distraction: involvement in joint ventures can distract management from core business
activities
Level Mark Descriptor
0 No rewardable material
1 1-8 • Demonstrates isolated knowledge and understanding of joint ventures; there may be major
gaps or omissions.
• Provides little evidence of analysis and links between considerations for Pelicans Corporation
when pursuing the joint venture. Analysis likely to consist of basic description of information.
• Meaning may be conveyed but in a non-specialist way; response lacks clarity and fails to
provide an adequate answer to the question.
2 9-11 • Demonstrates some knowledge and understanding of joint ventures with a few omissions.
• Some evidence of analysis and links between considerations for Pelicans Corporation when
pursuing the joint venture demonstrating some linkages and interrelationships.
• Demonstrates some use of logical reasoning, clarity, and appropriate specialist technical
language.
3 12-14 • Demonstrates clear and accurate knowledge and understanding of joint ventures with a few
omissions.
• Clear evidence of analysis demonstrating some linkages and interrelationships between
factors.
• Demonstrates clear use of logical reasoning, clarity, and appropriate specialist technical
language.
4 15-19 • Demonstrates accurate and thorough knowledge and understanding of joint ventures without
gaps or omissions.
 • Evidences thorough analysis leading to a balanced and contained linkages and
interrelationships between factors.
• Logical reasoning evidenced throughout response which is clear and uses specialist technical
language consistently.
9 (25 marks)
Critically discuss the advantages for an organisation of becoming a multinational business.
Q Indicative content Total
9 Economies of scale
• Increased scale of operations. Economies of volume, economies of learning.
• Cost per unit can be lowered through specialisation.
• Technical economies: use of automation. Fixed costs of the use of machines can be spread
over outputs.
• Purchasing economies: buying in bulk. Obtain supplies and materials at a cheaper cost per
unit.

Sources of lower production costs

• Lower labour costs (similar to outsourcing, without the disadvantages)
• Greater supervision and control
• Reduced transportation costs
• Reduced premises costs
• Avoidance of trade or tax barriers

Increased market share

• Saturation of existing markets can be addressed by access to new markets
• Location in multiple countries provides opportunities to develop products and services that
meet the needs of local customers

Risk reduction through diversification

• Management of domestic risks by diversification
• Utilisation of multinational structure to help to manage interest rate, forex etc.
• Use of multinational structure to manage income streams, ownership structures, debt
management.

Experience and new skills

• Access to new and different employee skills
• Job creation: can bring new opportunities to a community. Positive CSR effects

Other relevant material should be credited. 25

Level Mark Descriptor
0 No rewardable material
1 1-9 • Demonstrates isolated knowledge and understanding of advantages for an organisation of
becoming a multinational business; there may be major gaps or omissions.
• Provides little evidence of application and links between relevant advantages. Discussion
likely to consist of basic description of information.
• Meaning may be conveyed but in a non-specialist way; response lacks clarity and fails to
provide an adequate answer to the question.
2 10-14 • Demonstrates some knowledge and understanding of advantages for an organisation of
becoming a multinational business with a few omissions.
• Some evidence of discussions and links between considerations for an organisation of
becoming a multinational business demonstrating a few linkages and interrelationships.
 • Demonstrates some use of logical reasoning, clarity, and appropriate specialist technical
language.
3 15-18 • Demonstrates accurate knowledge and understanding of advantages for an organisation of
becoming a multinational business with a few omissions.
• Evidence of detailed discussion for an organisation of becoming a multinational business
demonstrating some linkages and interrelationships between factors leading to an analysis
being presented.
• Demonstrates the use of logical reasoning, clarity, and appropriate specialist technical
language.
4 19-25 • Demonstrates accurate and thorough knowledge and understanding of the advantages for
an organisation of becoming a multinational business without missions.
• Evidences thorough discussion leading to a balanced analysis containing linkages and
interrelationships between factors.
• Logical reasoning evidenced throughout response which is clear and uses specialist technical
language consistently.

10 (25 marks)
Capitals plc is a car manufacturer. Its operations and customer markets are both in India, but it plans to
expand into different international markets.
You are a marketing consultant. The directors of Capitals plc have asked you to provide them with a report
on the approaches to marketing strategy that might be used to support the company’s expansion into
international markets. In particular, the directors require advice regarding adopting either an adapted or
standardised marketing mix approach.
Required:
a. Analyse the factors that would influence the choice of marketing mix approach. (10 marks)
b. Justify the use of either the adapted or standardised approach for Capitals plc. (15 marks)
Q Indicative content Total
10a Internal factors
• Product design: tangibles, intangibles, exchange value
• Price: differentiation, product characteristics
• Strategic objectives: differentiation, cost leadership, market penetration
• Place: distribution channels
• Promotion: advertising, personal selling, publicity, public relations

External factors
• Consumer behaviour: demand, purchasing habits, disposable income, living habits
• Competitor behaviour: size and strength, number, product ranges
• Government: regulation of markets, products, taxation etc.
• Economic conditions: demand, levels of growth

A basic pass would include:

• Identification of internal and external factors that would influence the choice of marketing mix
approach.
• Some understanding of these factors in relation to the marketing mix approach.

A better answer would include:

• An explanation of the internal and external factors that would influence the choice of
marketing mix approach. 10
 • A developed understanding of these factors in relation to the marketing mix approach.
Mark Allocation Guidance
1-3 marks per factor, depending on the depth and use of to influence the choice of marketring mix
approach, up to a maximum of 10 marks.
10b Adaptation
• Emphasise the importance of customisation
• When entering a foreign market one must consider all environmental factors and constraints
such as language, climate, race, occupations, education, taste, different laws, cultures, and
societies.
• Adjust marketing strategy to fit new market demands.
• Alter marketing mix and marketing strategy to suit local tastes, meet special market needs and
consumers’ non-identical requirements.
• But - difficulty of measurement of factors such as cultural differences rooted in history,
education, religion, values and attitudes, manners and customs, aesthetics as well as
differences in taste, needs and wants, economics and legal systems.

• Advantages of adaptation: respect local specifications and expectations; excellent local image;
customers keep their landmarks and feel noticed
• Disadvantages of adaptation: higher costs; time consuming and poor speed of execution;
difficulty to know what consumers really want

Standardisation
• Union of cultures
• Similar environmental and customer demand around the globe.
• Trade barriers are getting lower
• Technological advances
• Thus, creating one strategy for all markets and standardisation of the marketing mix can
achieve consistency with customers as well as lower costs.
• Businesses have moved away from customising items to offering globally standardised
products that are advanced, functional, reliable and low priced.
• Businesses can achieve long-term success by concentrating on what everyone wants rather
than worrying about the particulars of what everyone thinks they might like.

• Advantages of standardisation: economies of scale; faster set up time; single coherent global
image; excellent monitoring of communication
• Disadvantages of standardisation: possible loss of advertising effectiveness; little reactivity and
little flexibility; can create a negative reaction from neglecting local needs 15
Level Mark Descriptor
0 No rewardable material
1 1-6 • Demonstrates isolated knowledge and understanding of relevant approach; there may be
major gaps or omissions.
• Provides little evidence of application and links between relevant approach. Analysis likely to
consist of basic description of information.
• Meaning may be conveyed but in a non-specialist way; response lacks clarity and fails to
provide an adequate answer to the question.
2 7-11 • Demonstrates accurate knowledge and understanding of relevant approach with a few
omissions.
• Evidence of application demonstrating some linkages and interrelationships between used
approaches leading to an analysis being presented.
 • Demonstrates the use of logical reasoning, clarity, and appropriate specialist technical
language.
3 12-15 • Demonstrates accurate and thorough knowledge and understanding of relevant approach;
any gaps or omissions are minor.
• Evidences thorough application leading to a balanced analysis containing linkages and
interrelationships between the use of either adapted or standardised approaches.
• Logical reasoning evidenced throughout response which is clear and uses specialist technical
language consistently.