Question
Refer to the Accord case study (SL/HL paper 1 Nov 2019).
a. Describe two reasons why secondary market research may not be useful to Accord.[4]
b. Explain possible economies of scale that may apply to $A B C$ but not to Accord.[6]
▶️Answer/Explanation
Ans:
a. Secondary market research – exploring data that has been already collected for a different purpose.
Data may not be quite what is required – most likely for the mass market.
Data likely to be dominated by large businesses rather than by small businesses.
Data likely to be for mass market rather than niche market.
Data may be out of date.
Accept any other reasonable reason.
Award [1] for each reason up to a total of [2].
Award [1] for putting the reason into context up to a total of [2].
b.
Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
Economies of scale: Reduction in the average costs of a business as the scale of production increases. In this context, “scale” means productive capacity (ie, the physical size of the business) rather than the actual level of production.
ABC is a large multinational so it can:
afford the best and most efficient equipment, whereas Accord will be very basic
direct effective marketing based on a whole range of products, whereas Accord only has a limited portfolio and little budget
employ a range of professionals and managers, whereas Accord only has the two owners so its skills and time are limited
access to a wide range of sources of finance, hence cheaper finance than Accord, which, as a partnership is limited.
Accept any other reasonable explanation/application of EOS.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section A.
Award a maximum of [2] if the discussion is only about ABC or Accord but not both.
Award maximum [3] for a theoretical answer.
Award maximum [5] if the analysis is mainly descriptive but in context.
N.B. Some textbooks refer to average costs going down when production goes up (because of fixed costs being spread out more). Technically this is incorrect, as this is about production efficiency rather than scale so should not be allowed.