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Two enterprise skills are:
1. Creativity (the ability to generate new and innovative ideas).
2. Perseverance (the determination to keep going despite challenges or setbacks).

Award 1 mark for each correct enterprise skill identified, up to a maximum of 2 marks.

Acceptable answers include:
- Creativity
- Perseverance / determination
- Risk-taking
- Problem-solving
- Delegation
- Resourcefulness
- Leadership
- Team building
- Self-confidence
- Effective communication
- Negotiation

Two benefits of operating as a sole trader are:
1. The owner retains 100% of the profits made by the enterprise.
2. The owner has complete control over all business decisions without needing to consult partners or shareholders.

Award 1 mark for each correct benefit identified, up to a maximum of 2 marks.

Acceptable answers include:
- Keeps all the profits
- Complete control / independence over decision-making
- Easy or inexpensive to set up / minimal legal formalities
- Financial accounts can be kept private / no obligation to publish accounts
- Highly flexible working hours / practices

Two disadvantages of using a bank overdraft are:
1. Overdrafts usually carry relatively high interest rates compared to long-term loans.
2. The bank has the right to withdraw or call in the overdraft limit at short notice.

Award 1 mark for each correct disadvantage identified, up to a maximum of 2 marks.

Acceptable answers include:
- High interest rates (usually charged daily)
- Can be withdrawn/called in by the bank at short notice
- Only suitable for short-term borrowing / small amounts
- May require a fee to set up even if not used

Two ways an enterprise can demonstrate ethical behavior towards its suppliers are:
1. Ensuring that all supplier invoices are paid on time in accordance with the agreed credit terms.
2. Paying fair, sustainable prices for raw materials rather than exploiting weak bargaining positions.

Award 1 mark for each correct ethical action identified, up to a maximum of 2 marks.

Acceptable answers include:
- Paying suppliers on time / sticking to agreed credit terms
- Paying fair prices (e.g., Fairtrade pricing)
- Providing clear and honest communication
- Offering stable, long-term contracts
- Not cancelling orders at the last minute without compensation

Profit is defined as the financial surplus left over when all of the enterprise's costs of operation are subtracted from its total revenue. The formula is: \(\text{Profit} = \text{Total Revenue} - \text{Total Costs}\).

Award 1 mark for stating it is the money left over after costs are paid / surplus.
Award 2 marks for a complete definition that clearly states it is total revenue minus total costs (or formula: \(\text{Profit} = \text{Total Revenue} - \text{Total Costs}\)).

Two methods an enterprise can use to manage and reduce risk are:
1. Carrying out market research to understand customer demand before producing goods.
2. Taking out insurance policies (e.g., public liability or theft insurance) to cover potential losses.

Award 1 mark for each correct risk-reduction method identified, up to a maximum of 2 marks.

Acceptable answers include:
- Carrying out thorough market research
- Taking out insurance policies
- Creating a detailed business plan
- Diversifying product lines / target markets
- Standard safety checks / risk assessments
- Staff training
- Maintaining cash reserves

Two informal sources of help and support for an entrepreneur are:
1. Family members (who might provide unpaid help, advice, or emotional support).
2. Friends (who can act as a sounding board for business ideas).

Award 1 mark for each correct informal source identified, up to a maximum of 2 marks.

Acceptable answers include:
- Family
- Friends
- Other local business owners / local entrepreneurs
- Teachers / lecturers / academic mentors

Reject: Banks, government agencies, accountants, solicitors (these are formal sources).

Two key stages in the negotiation process are:
1. Preparation (planning and gathering information before the meeting).
2. Bargaining (making proposals and discussing trade-offs to reach an agreement).

Award 1 mark for each correct stage identified, up to a maximum of 2 marks.

Acceptable answers include:
- Preparation / planning
- Opening / introduction
- Discussion / exploration of needs
- Proposals / bargaining
- Agreement / closing
- Review / evaluation

Disadvantages of crowdfunding include:
- The enterprise must publicise its business idea, which allows competitors to see and potentially copy it.
- Many platforms operate on an 'all-or-nothing' model, meaning that if the funding target is not fully met, all pledges are returned to supporters and the enterprise receives nothing.
- Crowdfunding platforms usually charge fees or take a percentage of the funds raised.

Award 1 mark for each valid disadvantage identified, up to a maximum of 2 marks.

Acceptable points include:
- Competitors can copy the idea / loss of intellectual property (1)
- Failing to reach the target means receiving no money (1)
- Platform fees/commission must be paid (1)
- Demands significant time and effort to market the campaign (1)

Do not accept: general disadvantages of loans, such as interest payments.

Methods of measuring customer satisfaction include:
- Carrying out customer surveys or questionnaires (online, via email, or in-store).
- Analysing the number of customer complaints or refund requests received.
- Checking online reviews, feedback, and star ratings on social media or review platforms.
- Monitoring repeat purchase rates and customer retention data.

Award 1 mark for each valid method identified, up to a maximum of 2 marks.

Acceptable points include:
- Surveys / questionnaires (1)
- Feedback forms / suggestion boxes (1)
- Tracking the number of customer complaints/refunds (1)
- Monitoring online reviews / social media ratings (1)
- Measuring repeat purchase rates / loyalty programme data (1)

Do not accept: 'market research' (too vague).

1 mark for identifying/defining a resourceful action (e.g., borrowing/leasing instead of buying, using existing space).
1 mark for applying it to Liam's camping gear rental context (e.g., borrowing tents, sleeping bags, or using a family garage for storage).
1 mark for explaining how this overcomes the lack of startup capital (e.g., reducing the initial cash outflow needed to launch).

[1] Identification of resourcefulness/creative solution.
[1] Application to the camping rental context.
[1] Explanation of how this solves the capital/funding problem.

1 mark for identifying a disadvantage of a partnership (e.g., shared profits, joint and several liability, loss of control, potential for conflict).
1 mark for applying it to Aisha's bakery enterprise (e.g., decisions on bread recipes, baking schedule, or sharing bakery profits).
1 mark for explaining the impact on Aisha (e.g., slower decision-making, frustration from disagreements, receiving less income than before).

[1] Identification of partnership disadvantage.
[1] Application to the bakery context.
[1] Explanation of the impact/consequence for Aisha.

1 mark for identifying a limitation of secondary research (e.g., outdated, not specific, gathered for another purpose, lack of accuracy).
1 mark for applying it to the pet-grooming/local town context (e.g., general pet statistics vs. local town needs, dog wash services).
1 mark for explaining how this impacts the start-up of her business (e.g., risk of making poor decisions on pricing/location, wasting investment).

[1] Identification of a limitation of secondary research.
[1] Application to pet grooming or local town context.
[1] Explanation of the consequence for the enterprise setup.

1 mark for identifying a cost associated with meeting product safety/regulations (e.g., buying certified materials, testing products, quality control).
1 mark for applying it to the wooden toys for children context (e.g., non-toxic paint, smooth wood, testing for choking hazards).
1 mark for explaining the direct impact on production costs (e.g., increased cost of raw materials, higher unit cost, lower profit margins unless prices are raised).

[1] Identification of regulatory compliance action/cost.
[1] Application to wooden toys context.
[1] Explanation of how this increases production/overall costs.

1 mark for identifying a risk management strategy (e.g., cross-training/multi-skilling, having a notice period, outsourcing, creating a talent pool).
1 mark for applying it to the bicycle repair shop context (e.g., fixing gears, maintaining bike parts, mechanics).
1 mark for explaining how this reduces the impact of the risk (e.g., prevents downtime, ensures repair services continue uninterrupted, retains customer trust).

[1] Identification of a risk management/reduction method.
[1] Application to bicycle repair context.
[1] Explanation of how this mitigates the risk's impact.

1 mark for explaining a loyalty scheme mechanism (e.g., reward for repeat purchase, progressive benefits).
1 mark for applying it to the gym context (e.g., gym memberships, personal training sessions, free months, fitness classes).
1 mark for explaining how this retention method works to keep customers (e.g., increases switching costs, builds brand loyalty, discourages cancellation).

[1] Description/identification of a loyalty scheme reward mechanism.
[1] Application to a gym context.
[1] Explanation of how this leads to retention (e.g., discourages switching, incentivises staying).

1 mark for identifying a benefit of ethical behavior (e.g., enhanced brand image, attracting customers, ability to charge higher prices, employee motivation).
1 mark for applying it to the clothing/cotton/fair wages context (e.g., garment buyers, ethical fashion, organic apparel).
1 mark for explaining how this benefit helps the enterprise succeed (e.g., increased sales from ethical shoppers, ability to cover higher costs with premium pricing).

[1] Identification of an ethical business benefit.
[1] Application to the clothing/cotton/wage context.
[1] Explanation of the positive outcome/benefit for the business.

1 mark for identifying a role/benefit of a business mentor (e.g., providing experience, guidance, networking, objective feedback).
1 mark for applying it to the pottery/craft start-up context (e.g., pricing pots, buying clay, setting up a kiln, craft markets).
1 mark for explaining how this guidance benefits the startup phase (e.g., avoids costly mistakes, speeds up the launch process, improves financial planning).

[1] Identification of what a mentor provides (advice, experience, feedback).
[1] Application to pottery/craft startup context.
[1] Explanation of how this specifically helps during the startup phase.

1. Identify a strategy: Charge a premium price or promote the ethical stance to a niche market (1 mark).
2. Apply to the bakery context: Market the baked goods in the biodegradable packaging to environmentally conscious customers (1 mark).
3. Explain the impact on profitability: The willingness of these customers to pay a higher price offsets the increased cost of the packaging, allowing the bakery to remain profitable while meeting its ethical goal (1 mark).

Award up to 3 marks:
- 1 mark for identifying a valid method/strategy to balance ethics and profit (e.g. charging a premium, niche marketing, cost-cutting elsewhere).
- 1 mark for application to the bakery and packaging context.
- 1 mark for explaining how this maintains or improves profitability (linking the action to profit).

1. Identify a customer retention method: Implementing a loyalty scheme or offering personalized after-sales service (1 mark).
2. Apply to the bicycle repair shop context: Offering a free safety check, tune-up discount, or specialized advice on bike components (1 mark).
3. Explain how it retains customers: This builds customer loyalty and provides a clear incentive for cyclists to return to the shop for future repairs, preventing them from switching to the competitor (1 mark).

Award up to 3 marks:
- 1 mark for identifying a valid customer retention method.
- 1 mark for application to the bicycle repair shop context (e.g., mentioning servicing, bikes, safety checks).
- 1 mark for explaining how the method secures repeat business/retains customers despite competitor actions.

An exemplar response: In our enterprise project to sell handmade greeting cards, we needed to negotiate the price of craft paper with a local stationer. Preparation: We prepared by researching other suppliers to find the market rate of \( \$0.15 \) per sheet and set our target price at \( \$0.12 \), with a limit of \( \$0.14 \). This preparation was highly effective because it gave us clear boundaries. Negotiation: During the actual negotiation, we proposed buying in bulk (100 sheets) to get a discount. We used a cooperative tactic by offering to put the stationer's logo on our packaging as free promotion. However, we were initially too nervous and did not hold our ground well when they proposed \( \$0.16 \). We had to use a time-out to consult our budget. Outcome: We eventually agreed on \( \$0.13 \) per sheet, which was within our range. This outcome was a win-win because we got cheap materials and they secured a large bulk sale. Evaluation: Overall, the negotiation was very effective. Although our execution during the discussion was hesitant, our excellent preparation and use of bulk purchasing power saved us \( \$15 \) in total costs, proving vital to our profitability.

Level 4 (9-10 marks): Two-sided evaluation of the negotiation process, supported by specific examples from the student's own project. A justified conclusion is reached regarding its overall effectiveness. Level 3 (6-8 marks): Detailed analysis of how different stages of the negotiation process (preparation, negotiation, outcome) affected the project's success or failure, with clear links to examples. Level 2 (3-5 marks): Applied description of the negotiation process in their own project (e.g., who they negotiated with, what they said, what was agreed). Level 1 (1-2 marks): Generic knowledge of the negotiation process, listing stages or tactics without specific application to their own project. Level 0 (0 marks): No creditable content.

An exemplar response: In our enterprise project, a key operational risk was equipment failure of our screen-printer, and a financial risk was failing to sell enough t-shirts to break even. To manage the operational risk, we used risk reduction by servicing the printer beforehand and having a backup manual screen ready. This was highly effective because when the power went out once, we switched to the manual screen and missed no deadlines. To manage the financial risk, we used risk reduction by conducting pre-orders with a \( \$5 \) deposit. This was extremely successful as it secured cash flow and guaranteed sales of 30 shirts before we even began production. In evaluation, our risk management methods were highly effective. By proactively reducing risks rather than just accepting them, we prevented both production delays and financial loss, ensuring our enterprise remained profitable and reputable.

Level 4 (9-10 marks): Two-sided evaluation of the effectiveness of the risk management methods used in their project. A clear, justified conclusion is provided, supported by specific project examples. Level 3 (6-8 marks): Analytical explanation of how the risk management methods succeeded or failed to mitigate risks in their project. Level 2 (3-5 marks): Application of risk concepts to their own project (e.g., identifying specific risks faced and explaining the actions taken to manage them). Level 1 (1-2 marks): Basic knowledge of risk or risk management methods (e.g., defining risks or listing ways to deal with risk like reduce, avoid, transfer). Level 0 (0 marks): No creditable content.

In our enterprise project, 'Eco-Pens', we needed to negotiate a bulk-buy discount for recycled cardboard barrels with a local stationery supplier.

Our preparation was vital. We researched alternative suppliers online and found import prices of $0.15 per unit, although delivery would take three weeks. We established our limit: a maximum price of $0.22 per unit to maintain a 50% profit margin, with an ideal target of $0.18. We also prepared a benefit for the supplier: offering to display their logo on our marketing flyers distributed to 500 students.

During the negotiation, we presented the logo-placement offer first. The supplier initially refused our target of $0.18, proposing $0.25 due to low stock levels. Because we had prepared our alternative (importing and delaying our launch), we confidently explained that we could not exceed $0.22. This preparation gave us the confidence to stand firm without risking a loss-making deal. We eventually agreed on $0.20 per unit, plus free delivery, in exchange for placing their logo on our flyers and our social media page.

Evaluation:
Our preparation was highly effective. Without establishing our maximum limit of $0.22 beforehand, we might have agreed to the supplier’s initial offer of $0.25 in the heat of the moment, which would have reduced our total profit by $15. However, our negotiation process had one weakness: we did not research the supplier's inventory issues beforehand. If we had known their stock was low, we could have offered to buy in two smaller batches, which might have secured our ideal target price of $0.18. Overall, the outcome was a win-win: we secured a sustainable price of $0.20 and free delivery, while the supplier gained valuable local advertising and cleared slow-moving stock.

Level 4 (13–15 marks):
Candidate offers a detailed evaluation of both the preparation and the negotiation process. A clear, reasoned judgment is made regarding the overall effectiveness and whether a mutually beneficial (win-win) outcome was achieved. The response is thoroughly supported by specific, realistic examples from the candidate's own enterprise project.

Level 3 (9–12 marks):
Candidate analyses how their preparation and/or the negotiation process affected the outcome. Explanations focus on cause-and-effect relationships (e.g., explaining why having an alternative supplier gave them bargaining power). Examples from the project are clearly integrated.

Level 2 (4–8 marks):
Candidate applies negotiation concepts to their own project. Describes what preparation was done (e.g., setting a budget) and what happened during the negotiation, but lacks deep analysis of why it succeeded or failed.

Level 1 (1–3 marks):
Candidate demonstrates basic knowledge of negotiation terms (e.g., target price, compromise, win-win, preparation) without clear application to their own project.

0 marks:
No response or response not worthy of credit.

Our enterprise project, 'FreshBites', a healthy lunch delivery service for teachers, faced three major risks: financial risk (losing capital if we did not sell enough meals), operational risk (equipment breakdown preventing food preparation), and health and safety risk (food contamination or allergies).

To manage the financial risk of unsold food, we used a risk reduction strategy of taking pre-orders with advance payments. Teachers had to order and pay by Thursday for Friday delivery. This was extremely effective because we only purchased ingredients for guaranteed sales. We had zero wasted stock, and our financial loss risk was reduced to nearly zero. However, this strategy restricted impulse purchases, which limited our potential sales volume by an estimated 20%.

To manage the health and safety risk of food allergies, we used a risk avoidance strategy. We completely excluded common allergens (nuts and shellfish) from our menu and printed full ingredient lists on our packaging. While this kept our customers 100% safe, it did increase our packaging costs by $0.05 per meal to print customized ingredient labels.

To manage operational risk, we could have transferred risk by taking out equipment breakdown insurance, but we decided against this due to high premium costs ($50). Instead, we did nothing, which was a poor strategy as our main blender broke on week two, delaying deliveries by 45 minutes and damaging our reputation.

Evaluation:
Overall, our risk management was highly effective for high-impact areas like financial loss and food safety. Pre-orders completely protected our tiny startup capital, which was our priority, even though it restricted growth. However, our lack of contingency planning for operational equipment was a significant failure that could have been easily managed by securing a backup blender from a team member's home.

Level 4 (13–15 marks):
Candidate provides a comprehensive evaluation of the risk management strategies used (or omitted). A clear, balanced judgment is made about the overall effectiveness of these strategies in protecting the enterprise, weighing benefits against drawbacks (such as costs or lost sales). Well-supported with clear, specific examples from their own project.

Level 3 (9–12 marks):
Candidate analyses the risks faced and how specific management strategies mitigated them. Explanations show clear cause-and-effect links (e.g., explaining how pre-orders prevented wastage and cash flow issues). Examples from the project are utilized effectively.

Level 2 (4–8 marks):
Candidate describes the risks faced and/or the strategies implemented in their project. This is descriptive rather than analytical (e.g., 'We decided to use hairnets to keep the kitchen clean').

Level 1 (1–3 marks):
Candidate identifies types of business risks (financial, physical, operational) or general risk management techniques (reduce, avoid, transfer, accept) without meaningful application to their project.

0 marks:
No response or response not worthy of credit.