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2 M18 3 BUSMT BP1 ENG TZ0 XX CS Afghan Sun AS Suchenlin has made her fortune from the success of her business High end Holidays HH which sells individually designed holidays to luxury destinations in Africa Asia and the Pacific islands Suchenlin no longer takes part in the day to day running of HH Instead she has an input into strategic decision making and she provides the inspiration for the business 5 10 15 20 25 30 35 40 Su as her friends know her has made more than enough money to keep her comfortable for the rest of her life but she still wants new challenges She is looking for a completely new project that will allow her to give back to society On a recent trip to Bangladesh Su discovered the work of Arif Koomar He founded a forprofit microfinance provider which trades under the name AK Bank Very successful AK Bank serves much of Bangladesh and has provided finance to over three million households to buy solar power systems specifically commissioned by AK Bank Each solar power system generates enough electricity for a household Su made an immediate decision She would find somewhere else in the world in which a similar scheme would bring great benefits to communities She eventually identified Afghanistan a country with around 34 million people After years of war many areas of Afghanistan lack a reliable supply of electricity Su saw an opportunity to manufacture a household based solar power systems similar to those used in Bangladesh and aimed at poor and often remote families She set up a social enterprise called Afghan Sun AS which operates as a private limited company Su recruited a team of volunteers from HH employees who are keen to work on the project After more detailed research the team had decided the product to be made solar power systems These will be produced using cellular manufacturing The team wish to purchase cheap raw materials using resources efficiently to cut waste to enable a very low price to be charged for the units identified suppliers who share Su s vision encouraged Arif Koomar to work with AS and expand the microfinance activities of AK Bank into Afghanistan Su thinks it very important that she maintains a leadership role for both HH and AS However she empowers her managers at HH to make day to day decisions including organizing resources directing staff coordinating and taking tactical decisions As well as empowering managers Su thinks that it is important to empower employees and encourage teamwork by creating opportunities for employees to discuss working practice quality issues and matters concerning employees Su s intention is to empower managers similarly at AS while retaining responsibility for strategic decisions She believes that her managers are so well motivated and committed to their work that she feels little need to interfere There is seldom conflict between managers but when there is Su will provide advice and guidance Managers both at HH and AS say that they are inspired by Su and have a clear understanding of her mission and share it As part of her leadership role Su also enjoys some aspects of organizing particularly when fundraising events for AS are needed and meetings have to be arranged with governments and non governmental organizations NGOs She usually represents the businesses at such meetings and conferences

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3 45 50 M18 3 BUSMT BP1 ENG TZ0 XX CS To help begin the project to make and sell solar power systems Su appointed David who before asking to work on the AS project worked in HH s marketing department He is an Afghan She also appointed Salima also an Afghan who has experience with a large manufacturing business as a production director Two more senior managers will be needed and Su needs to decide between selecting experienced HH managers or promoting junior employees from within HH Salima does not want to outsource the main production facility of the solar power systems but does wish to outsource the production of certain components Ideally this would be in nearby countries An important decision to be made is the location of the main production facility for the solar power systems Su is considering two locations as shown in Table 1 Table 1 Location factors of the two countries Su is considering for the main production facility Country A 55 60 Country B Nature of the economy Developed economy Developing economy Unemployment Low but rising High Skills level High Shortage of skills Government assistance Limited free market economy Encourages investment from overseas with grants available Local wage costs High Low Currency Stable Falling Facilities New facilities would be required high rents Suitable facilities available at a low rent Transport links to Afghanistan Complex Straightforward Political environment Stable but election may lead to a change in government One party state International trade Part of a major trading agreement No major trading agreements David believes that commercial marketing would have more of an impact than social marketing because he sees the solar power systems as being product orientated rather than market orientated Customers would need to know not only about the solar power systems and the benefits they will bring to households but also the means to provide finance to buy them However David is unsure about which pricing and promotion methods would be appropriate for the solar power systems Customers may not have much money to spend and may have other priorities Distribution will also be a problem as the likely customers will be in remote locations with poor infrastructure David is investigating the possibility of using local agents and local transport businesses to provide the link with customers Turn over

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4 65 M18 3 BUSMT BP1 ENG TZ0 XX CS Su had already decided that most of the finance for the production facilities would come from share capital provided by herself and loans from HH She wondered whether other stakeholders in HH both internal and external might want to support the project through some kind of financial assistance The microfinance to AS s customers would be under completely separate arrangements with AK Bank or other microfinance providers Su prepared a six monthly cash flow forecast for the first three years of operation Table 2 Six monthly cash flow forecast for AS for the first three years of operation figures in 000s 2018 Second half 30 25 20 5 15 0 20 80 120 120 160 Capital expenditure 200 50 25 25 10 10 Sales costs 0 15 40 60 60 70 Other costs 20 10 10 20 30 40 Closing balance 30 25 20 5 15 55 Su s share capital 200 Loans from HH 50 Sales 75 2021 First half 0 First half 2020 Second half Opening balance 70 2019 Second half First half Su is aware that the project carries significant risks Afghanistan is emerging from a long and damaging war and in some parts of the country it remains politically unstable Not all areas of the country are peaceful International forces remain in the country to help rebuild its infrastructure and help the Afghan government restore peace and reinforce democracy The management of AS need to make the decisions on production and distribution as soon as possible to get the project into action Su is also aware that she may have to create a plan to help out when things go wrong and to prepare for possible changes in the external environment AS will have to carry out very careful marketing planning and human resource planning as well as ensure it is prepared for uncertainties Source International Baccalaureate Organization 2018 Companies products or individuals named in this case study are fictitious and any similarities with actual entities are purely coincidental

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3 M18 3 BUSMT HP1 ENG TZ0 XX Section A Answer two questions from this section 1 2 a With reference to Table 2 describe two advantages for Su of using a cash flow forecast 4 b With reference to Su and her managers at HH and AS explain the differences between leadership and management 6 a With reference to AK Bank describe two features of for profit microfinance providers 4 b Su is considering two possible locations for the production facility lines 51 52 Explain the factors reasons that Su may consider when deciding between the two locations 6 3 a Describe two advantages for AS of using cellular manufacturing in the production of its solar power systems b Explain the advantages for Su of forming AS as a private limited company 4 6 Turn over

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4 M18 3 BUSMT HP1 ENG TZ0 XX Section B Answer the following question 4 It is now mid 2019 Production of solar power systems has been going for over a year and sales have exceeded forecasts and reached 5000 systems for the year Profits have been reinvested into developing new outlets and distribution channels for solar power systems in Afghanistan Lean production techniques have enabled AS to keep costs low but AS has had some quality issues some cells produce lower quality systems than others AS has found faults in components bought from suppliers Some solar power systems have been damaged in the supply chain Salima is thinking of instituting total quality management TQM She also needs to forecast sales for 2020 but has decided the situation is not suitable for a four part moving average In a separate development Doorway Foundation DF a multibillion dollar charity established by the owners of one of the world s largest IT businesses has approached Su The foundation has a major IT initiative to bring IT to schools in Afghanistan Myanmar and Bangladesh By forming a joint venture DF could use AS s expertise and local knowledge to help solve some of the electricity supply and IT problems in Afghanistan The possibility of a joint venture encouraged managers and investors to think about whether AS should grow In response Su decided to analyse the possibility of growth through change using a force field analysis of AS Source International Baccalaureate Organization 2018 This question continues on the following page

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5 M18 3 BUSMT HP1 ENG TZ0 XX Question 4 continued Table 3 Force field analysis for growth through change at AS Driving forces Su s score Restraining forces Su s score Su wants to widen the scope of the social enterprise 5 Possible diseconomies of scale from growing 4 Team of volunteers keen to make even more of a difference 3 Resistance to change 2 Businesses need to grow 1 Su does not want to neglect Afghanistan project 4 Opportunities to be taken in other Asian countries 2 Su has already put a great deal of finance into the business 2 Opportunities to develop new products 2 Worldwide economic recession affecting HH 3 Clear needs for help beyond Afghanistan 3 Quality issues need to be solved first 1 Su still feels a need to make a difference 5 Might not get further financial support 2 Possibility of bringing in new ideas from external recruitment 2 Too much responsibility for Su 3 All stakeholders share Su s enthusiasm for progress so far 3 External recruitment may cause problems 1 The business is already high risk 2 Growth through change Source International Baccalaureate Organization 2018 a Define the term four part moving average 2 b With reference to AS explain the difference between commercial marketing and social marketing of the solar power systems line 53 4 c Explain how total quality management TQM could help AS improve the quality of its products 4 d Using information from the case study additional information from pages 4 and 5 and appropriate business tools discuss the value to Su of the force field analysis in deciding whether to grow through change 10 Turn over

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6 M18 3 BUSMT HP1 ENG TZ0 XX Section C Answer the following question 5 Su is considering two options Option 1 The joint venture If AS goes ahead with the joint venture in 2019 there will be consequences it will need to face DF would have majority ownership in the joint venture provide most of the senior managers and is likely to expect changes in the way AS operates AS would have to significantly increase the production of solar power systems and would have to restructure Some managers may lose influence over decisions Su is worried that her Afghanistan project AS would take second place Having a close working relationship with DF would reduce AS s risk of failure Employees at AS have heard rumours about the joint venture and are unhappy with the idea They fear a loss of identity being overwhelmed by a much larger organization and possibly losing their jobs Su is concerned that resistance to change particularly by employees and managers is going to be an important consideration in the decision However she sees the situation as a huge opportunity to make a real change in young people s lives AS would invest 1 million The net cash inflows to AS ignoring inflows to DF and before deduction of the investment cost are forecast to be 0 4 million per year giving a net present value NPV at 6 discount rate of 0 68 million and a payback of two years and six months Su gives the project a life of five years Option 2 Diversification into biomass The research and development section of AS has developed a portable electricity generation system based on biomass a biomas power system BPS as an alternative to solar power systems A new factory costing 3 million will be needed BPS will be particularly useful to those communities that keep cattle the dung produced provides the fuel for BPS Su has assembled some relevant information Source International Baccalaureate Organization 2018 dung animal waste from the cattle This question continues on the following page

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5 M18 3 BUSMT HP1 ENG TZ0 XX M The markbands and assessment criteria on pages 5 8 should be used where indicated in the markscheme Section A Q1 b Q2 b Level descriptor Q3 b Marks 0 1 2 The work does not reach a standard described by the descriptors below Little knowledge and understanding of relevant issues and 3 4 A description or partial analysis of some relevant issues 5 6 business management tools where applicable techniques and theories Little use of business management terminology Little reference to the stimulus material with some use of business management tools where applicable techniques and theories Some use of appropriate terminology Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization At the lower end of the markband responses are mainly theoretical An analysis of the relevant issues with good use of business management tools where applicable techniques and theories Use of appropriate terminology throughout the response Effective use of the stimulus material

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6 Section B Q4 d M18 3 BUSMT HP1 ENG TZ0 XX M Level descriptor Marks 0 1 2 The work does not reach a standard described by the descriptors below 3 4 Little understanding of the demands of the question Few business management tools where applicable techniques and theory are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization 5 6 Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated 7 8 Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated 9 10 Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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7 M18 3 BUSMT HP1 ENG TZ0 XX M Section C question 5 Criterion A Knowledge and understanding of tools techniques and theories This criterion addresses the extent to which the candidate demonstrates knowledge and understanding of relevant business management tools techniques and theories as stated and or implied by the question This includes using appropriate business management terminology Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Superficial knowledge of relevant tools techniques and theory is demonstrated Satisfactory knowledge and understanding of relevant tools techniques and theories is demonstrated Good knowledge and understanding of relevant tools techniques and theories is generally demonstrated though the explanation may lack some depth or breadth Good knowledge and understanding of relevant tools techniques and theories is demonstrated Criterion B Application This criterion addresses the extent to which the candidate is able to apply the relevant business management tools techniques and theories to the case study organization Marks Level descriptor 0 The work does not reach a standard described by the descriptors below 1 The relevant business management tools techniques and theories are connected to the case study organization but this connection is inappropriate or superficial 2 The relevant business management tools techniques and theories are appropriately connected to the case study organization but this connection is not developed 3 The relevant business management tools techniques and theories are generally well applied to explain the situation and issues of the case study organization though the explanation may lack some depth or breadth Examples are provided 4 The relevant business management tools techniques and theories are well applied to explain the situation and issues of the case study organization Examples are appropriate and illustrative Criterion C Reasoned arguments This criterion assesses the extent to which the candidate makes reasoned arguments This includes making relevant and balanced arguments by for example exploring different practices weighing up their strengths and weaknesses comparing and contrasting them or considering their implications depending on the requirements of the question It also includes justifying the arguments by presenting evidence for the claims made Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Statements are made but these are superficial Relevant arguments are made but these are mostly unjustified Relevant arguments are made and these are mostly justified Relevant balanced arguments are made and these are well justified

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8 M18 3 BUSMT HP1 ENG TZ0 XX M Criterion D Structure This criterion assesses the extent to which the candidate organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction a body a conclusion fit for purpose paragraphs Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Two or fewer of the structural elements are present and few ideas are clearly organized Three of the structural elements are present or most ideas are clearly organized Three or four of the structural elements are present and most ideas are clearly organized All of the structural elements are present and ideas are clearly organized Criterion E Individual and societies This criterion assesses the extent to which the candidate is able to give balanced consideration to the perspectives of a range of relevant stakeholders including individuals and groups internal and external to the organization Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below One individual or group perspective is considered superficially or inappropriately One relevant individual or group perspective is considered appropriately or two relevant individual or group perspectives are considered superficially or inappropriately At least two relevant individual or group perspectives are considered appropriately Balanced consideration is given to relevant individual and group perspectives

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9 M18 3 BUSMT HP1 ENG TZ0 XX M Section A 1 a With reference to Table 2 describe two advantages for Su of using a cash flow forecast 4 Possible advantages include it shows when there is expected to be cash shortfall especially late 2018 early 2019 it is suitable for what if For example if a bigger loan was sought there might not be a cash shortfall Any other relevant advantage Mark as 2 2 Award 1 for each advantage identified and 1 for the development of each of this advantage in the context of AS Award up to a maximum of 2 per advantage b With reference to Su and her managers at HH and AS explain the differences between leadership and management Su shows distinct leadership qualities She inspires sets missions takes responsibility for strategic decisions takes on the role of spokesperson delegates advises guides shows features of McGregor Theory Y Her managerial roles are somewhat limited but include organizing at a corporate level Most of the management functions are delegated Managers fulfil management functions including making day to day decisions making tactical decisions organizing resources directing coordinating staff Accept any other relevant difference Marks should be allocated according to the markbands on page 5 Award a maximum of 3 for a theoretical answer Award a maximum of 5 if the explanation of advantages is mainly descriptive but in context 6

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11 b M18 3 BUSMT HP1 ENG TZ0 XX M Su is considering two possible locations for the production facility lines 51 52 Explain the factors reasons that Su may consider when deciding between the two locations This is not an AO3 question so there does not have to be a recommendation Factors reasons include For country B This is a social enterprise so a developing economy may be important Distribution could be a problem so simple transport links are favourable But One party state may be high risk and seen as unethical Quality is an issue so skills are important For Country A Free market economy high skills Trading easier Stable currency stable government But Does it need the work Costs likely to be higher Finance not so important so how relevant are grants low rents Accept any other relevant analysis Marks should be allocated according to the markbands on page 5 Award a maximum of 3 for a theoretical answer Award a maximum of 4 if explanation does not effectively bring out the reasons Award a maximum of 5 if the explanation of more than one reasons is mainly descriptive but in context For full marks the explanation needs to be developed and in context 6

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12 3 a M18 3 BUSMT HP1 ENG TZ0 XX M Describe two advantages for AS of using cellular production in the production of its solar power systems 4 Cellular production relies on team work which helps motivation Tasks are completed by the team This could help AS achieve its desired high quality efficient use of resources reduction of waste Accept any other relevant advantage Mark as 2 2 Award 1 for each advantage identified and 1 for the development of each of these advantages in the context of AS up to a maximum of 2 b Explain the advantages for Su of forming AS as a private limited company Advantages Limited liability the business is fairly high risk so Su may need protection of her personal finances Limited number of shareholders may be important to retain the high ethical values Difficult to takeover Su will want to keep this project hers Separate legal entity Able to raise additional finance without losing control Continuity assured Accept any other relevant advantage Marks should be allocated according to the markbands on page 5 Award a maximum 3 for a theoretical answer Award a maximum 5 if the explanation is mainly descriptive but in context 6

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13 M18 3 BUSMT HP1 ENG TZ0 XX M Section B 4 a Define the term four part moving average 2 A four part moving average is the average of four adjacent terms in a time series The starting point progresses gradually through the time series Candidates are not expected to word their definition exactly as above All three are not needed Although it is define an example can help Award 2 for a full definition Award 1 for some understanding of the term b With reference to AS explain the difference between commercial marketing and social marketing of the solar power systems line 53 4 Commercial marketing focuses on the potential buyers of a product service Social marketing considers the effects of the product service on the whole of society For the solar panels commercial marketing would focus on the customers persuading them to buy the panels in order for AS to make a profit It would attract customers through the benefits and through available finance Social marketing will focus on the benefits the systems have on the Afghan communities in particular poor and remote communities Social marketing may focus on long term benefits and more general issues such as bringing stability to Afghanistan Award a maximum of 2 for a theoretical answer or for an answer that explains without drawing out differences Award 4 for an answer that explains one or more difference in context c Explain how total quality management TQM could help AS improve the quality of its products Total quality management seeks to ensure the highest quality standards throughout a business AS is having quality issues in particular with some cells performing less well than others There are problems with the supply chain and there are problems with some suppliers By employing TQM the whole process from supplier to delivery will be reassessed with the aim of zero defects throughout Mark as 2 2 Award a maximum of 4 for an explanation in context For non contextual answers award a maximum of 2 4

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14 d M18 3 BUSMT HP1 ENG TZ0 XX M Using information from the case study additional information from pages 4 and 5 and appropriate business tools discuss the value to Su of the force field analysis in deciding whether to grow through change Positive benefits AS needs to make some long term decisions FFA will help in the process of deciding whether to change or whether to remain the same The basic question is should AS remain the same or grow The subsidiary question is how best to grow Driving forces will support the arguments for growth whereas restraining forces will support staying the same The driving forces in the table are a useful starting point How can you distinguish between the value of Su s beliefs and needs with the needs of the people in other parts of Asia How can you compare the team s needs with Su s At best scores in the table will be subjective The FFA helps to clarify thinking identify the factors involved in the decision and point to the issues that need to be balanced It cannot make the decision but can help clarify the issues Marks should be allocated according to the markbands on page 6 Purely theoretical answer or with no effective use of stimulus material in range 3 to 4 with better answers award a maximum of 4 If discussion is one sided award a maximum of 5 Both sides considered good use of evidence particularly from section B but no effective conclusion award a maximum of 8 For full marks a fully supported conclusion with good use of evidence particularly from section B 10

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15 M18 3 BUSMT HP1 ENG TZ0 XX M Section C 5 Using the case study additional information on pages 6 and 7 and appropriate planning tools recommend whether Su should choose Option 1 Option 2 or neither You will find it useful to calculate the ARR for Option 1 PLEASE ANNOTATE SCRIPTS WHEN CRITERION A IS HIGHLIGHTED IN THE MARK BOX Marks should be allocated according to the assessment criteria on pages 7 8 Note a recommendation that a decision cannot be made due to lack of information eg market research can be regarded as a decision provided the arguments are supported Doing nothing No additional investment Successful no need for change Resistance to change Su can still manage effectively Low risk but will market become saturated But Missed opportunities Will Su be satisfied Businesses will naturally want to grow Loss of motivational opportunity Joint venture with DF Big opportunity to have an impact on a wider larger scale Positive NPV good ARR relatively short payback Suits Su s objectives Risk smaller because of joint venture But Could be overwhelmed Restructuring needs Large investment Managers lose influence Demotivating Possible job losses Are investment appraisal results realistic eg 6 discount rate Biomass Smaller investment Retains autonomy Provides a valuable service to wider community But Fairly large investment Source of finance High risk Smaller NPV ARR larger payback ARR for Option 1 The calculation is annual net cash flow investment x 100 The investment is 1m The cash inflow is 0 4m The project takes 5 years The ARR is 5 x 0 4 1 5 1 x 100 20

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16 M18 3 BUSMT HP1 ENG TZ0 XX M Do not penalize candidates who do not consider the do nothing option Criterion A possible theories planning tools and techniques include Investment appraisal Management issues such as management of change HRM issues such as motivation risk including Ansoff joint ventures production problems force field analysis the importance of assumptions Planning tools include those in Section 1 7 of the syllabus plus Ansoff and investment appraisal No understanding of investment appraisal max 3 For 4 Correct investment appraisal calculation plus at least one other tool technique or theory understood and developed well with some relevance to the additional stimulus material For 2 some understanding of at least two tools techniques or theories but not developed Criterion B the tools techniques theories and stimulus applied to the decision Application will be judged by the use of the stimulus material in particular the extra material especially Table 4 For 4 relevant tools techniques and theories are applied well to the case study including OFR context and additional stimulus material the application is convincing and relevant If only one option considered max 3 Limited use of Table 4 max 3 For 2 some limited context application but not developed Use of tools limits candidate s ability to make reasoned arguments If a candidate calculates ARR but then does not use it reward can only be made in Criterion A Criterion C Options discussed in a balanced way conclusions drawn as to whether they work Remember do nothing can be a recommendation For 4 There needs to be a comparison between the two options using Section C and other material and a recommendation Option 1 Option 2 or do nothing made and supported For 2 Only one option considered or some limited arguments but not justified No comparison limited analysis but candidate arrives draws a reasoned conclusion Criterion D Structure This criterion assesses the extent to which the student organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction logical structure a conclusion fit for purpose paragraphs This means not too long focused on distinct issues sequenced well guides the reader BEWARE OF UNDER_REWARDING WEAK SCRIPTS WHICH NONETHELESS HAVE SOME OR ALL OF THE ELEMENTS The candidate will lose marks in the other criteria so they should not be double penalized For 4 all four elements present clearly organized and there is clarity in the student s answer

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2 M18 3 BUSMT SP1 ENG TZ0 XX Section A Answer two questions from this section 1 2 a With reference to Table 2 describe two advantages for Su of using a cash flow forecast 4 b With reference to Su and her managers at HH and AS explain the differences between leadership and management 6 a With reference to AK Bank describe two features of for profit microfinance providers 4 b Su is considering two possible locations for the production facility lines 51 52 Explain the factors reasons that Su may consider when deciding between the two locations 6 3 a Describe two advantages for AS of using cellular manufacturing in the production of its solar power systems b Explain the advantages for Su of forming AS as a private limited company 4 6

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3 M18 3 BUSMT SP1 ENG TZ0 XX Section B Answer the following question 4 It is now mid 2019 Production of solar power systems has been going for over a year Sales have exceeded forecasts and reached 5000 systems for the year All profits have been reinvested into developing a portable biomass source of electricity PBS as an alternative to solar power systems The PBS technology is now fully developed and tested Su has data to help her decide whether to go into production The new production facility will cost 1 million The costs and the price of the product once production has begun are estimated in Table 3 Table 3 Estimated cost and price data for PBS Fixed costs 200 000 per year Variable costs 70 per PBS Likely price 90 per PBS In a separate development Doorway Foundation DF a multibillion dollar charity established by the owners of one of the world s largest IT businesses has approached Su The foundation has a major IT initiative to bring IT to schools in Afghanistan Myanmar and Bangladesh By forming a joint venture DF could use AS s expertise and local knowledge to help solve some of the electricity supply and IT problems in Afghanistan DF would have majority ownership in the joint venture provide most of the senior managers and is likely to expect changes in the way AS operates AS would have to significantly increase the production of solar power systems and would have to restructure Some managers may lose influence over decisions Su is worried that her Afghanistan project AS would take second place However she sees this as a huge opportunity to make a real change in young people s lives Source International Baccalaureate Organization 2018 portable biomass source of electricity a means of generating electricity using the heat obtained from burning plant material and or animal waste a Define two characteristics of a charity b i Using the information in Table 3 calculate the break even output for portable biomass sources of electricity show all your working 2 ii Comment on the usefulness to AS of break even analysis 6 c Recommend whether AS should enter into a joint venture with DF 2 10

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5 M18 3 BUSMT SP1 ENG TZ0 XX M The markbands on pages 5 6 should be used where indicated in the markscheme Section A Q1 b Q2 b Level descriptor Q3 b Marks 0 1 2 The work does not reach a standard described by the descriptors below Little knowledge and understanding of relevant issues 3 4 A description or partial analysis of some relevant issues 5 6 and business management tools where applicable techniques and theories Little use of business management terminology Little reference to the stimulus material with some use of business management tools where applicable techniques and theories Some use of appropriate terminology Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization At the lower end of the markband responses are mainly theoretical An analysis of the relevant issues with good use of business management tools where applicable techniques and theories Use of appropriate terminology throughout the response Effective use of the stimulus material

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6 Section B M18 3 BUSMT SP1 ENG TZ0 XX M Level descriptor Q4 c Marks 0 1 2 The work does not reach a standard described by the descriptors below 3 4 Little understanding of the demands of the question Few business management tools where applicable techniques and theories are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization 5 6 Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated 7 8 Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated 9 10 Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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7 M18 3 BUSMT SP1 ENG TZ0 XX M Section A 1 a With reference to Table 2 describe two advantages for Su of using a cash flow forecast 4 Possible advantages include it shows when there is expected to be cash shortfall especially late 2018 early 2019 it is suitable for what if For example if a bigger loan was sought there might not be a cash shortfall for use as a planning tool to inform stakeholders e g banks when finance is needed Do not reward ideas such as predicting future costs calculating assessing profits NB Cash flow profit liquidity working capital are all different concepts so do not reward profit or liquidity or working capital unless the candidate demonstrates that cash flows indicate areas for improvement and that improving management of cash flow could lead to improved profits or improved liquidity Context will usually be achieved by using information from the table Any other relevant advantage Mark as 2 2 Award 1 for each advantage identified and 1 for the development of each of this advantage in the context of AS Award up to a maximum of 2 per advantage b With reference to Su and her managers at HH and AS explain the differences between leadership and management Su shows distinct leadership qualities She inspires sets missions takes responsibility for strategic decisions takes on the role of spokesperson delegates advises guides shows features of McGregor Theory Y Her managerial roles are somewhat limited but include organizing at a corporate level Most of the management functions are delegated Managers for example David and Salima fulfil management functions including making day to day decisions making tactical decisions organizing resources directing coordinating staff Accept any other relevant difference Marks should be allocated according to the markbands on page 5 Award a maximum of 3 for a theoretical answer Award a maximum of 4 if no reference to David Salima managers Award a maximum of 5 if the explanation of differences is mainly descriptive but in context To achieve 5 or 6 marks there has to be a comparison 6

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8 2 a M18 3 BUSMT SP1 ENG TZ0 XX M With reference to AK Bank describe two features of for profit microfinance providers Features include they provide small amounts of capital they provide finance to people who might otherwise not get finance eg poorer people specific groups such as women they often help business start ups they lend to people without collateral they often operate in developing economies Candidates may interpret AK Bank as being a social enterprise and this is a reasonable assumption Although it is unusual to assume it is not a social enterprise this will also be allowed Comments such as low or high interest rates are too vague unless developed Context will come from the information given about AK Bank Two different contexts are needed Context includes the activities in Bangladesh the fact that it will work with a social enterprise such as AS support for other social causes Do not reward answers that say it s for profit and or it provides finance unless these are developed Mark as 2 2 Accept any other relevant feature Award 1 for each correct feature identified and 1 for a description of how that feature relates to AK Award a maximum of 2 per feature 4

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9 b M18 3 BUSMT SP1 ENG TZ0 XX M Su is considering two possible locations for the production facility lines 51 52 Explain the factors reasons that Su may consider when deciding between the two locations This is not an AO3 question so there does not have to be a recommendation Factors reasons include For country B This is a social enterprise so a developing economy may be important Distribution could be a problem so simple transport links are favourable But One party state may be high risk and seen as unethical Quality is an issue so skills are important For Country A Free market economy high skills Trading easier Stable currency stable government But Does it need the work Costs likely to be higher Finance not so important so how relevant are grants low rents NB A decision is not required However an answer that works towards a decision may discuss factors and can be rewarded Accept any other relevant analysis Marks should be allocated according to the markbands on page 5 Award a maximum of 3 for a theoretical answer Award a maximum of 4 if explanation does not effectively bring out the factors reasons or only considers one country Award a maximum of 5 if the explanation of more than one factors reasons is mainly descriptive but in context For full marks the explanation needs to be developed and in context and both countries considered 6

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10 3 a M18 3 BUSMT SP1 ENG TZ0 XX M Describe two advantages for AS of using cellular production in the production of its solar power systems 4 Cellular production relies on team work which helps motivation Tasks are completed by the team This could help AS achieve its desired high quality efficient use of resources reduction of waste Complexity of assembling solar panels which may require teams Context includes AS is based on teamwork volunteers good way to empower employees which is what Su wants to do quality is important to AS Accept any other relevant advantage Mark as 2 2 Award 1 for each advantage identified and 1 for the development of each of these advantages in the context of AS up to a maximum of 2 b Explain the advantages for Su of forming AS as a private limited company Advantages Limited liability the business is fairly high risk so Su may need protection of her personal finances Limited number of shareholders may be important to retain the high ethical values Difficult to takeover Su will want to keep this project hers Separate legal entity Able to raise additional finance without losing control Continuity assured Context includes Protects Su s other assets Afghanistan is high risk incorporation reduces the risks to Su AK Bank may not want to work with an unincorporated business May be easier to arrange finance as shown in cash flow Accept any other relevant advantage Marks should be allocated according to the markbands on page 5 Award a maximum 3 for a theoretical answer Award a maximum 4 if only one advantage in context is considered Award a maximum 5 if the explanation is mainly descriptive but in context 6

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11 M18 3 BUSMT SP1 ENG TZ0 XX M Section B 4 a Define two characteristics of a charity 2 A charity usually performs useful social environmental functions Charities usually have a tax advantage Charities usually do not seek to make a profit Candidates are not expected to word their answer exactly as above Award 1 for each characteristic identified b i Using the information in Table 3 calculate the break even output for portable biomass sources of electricity PBS show all your working B E FC price unit variable cost 200 000 90 70 2 200 000 20 10 000 PBS Award 2 for 10 000 units per year Award 1 if either no units or no working ii Comment on the usefulness to AS of break even analysis It gives a minimum target for sales Is 10 000 PBS per year OFR achievable It is useful for what if It could help in setting prices It could help in production planning However is the data realistic Will all units be sold Award a maximum of 4 for a theoretical answer 6

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12 c M18 3 BUSMT SP1 ENG TZ0 XX M Recommend whether AS should enter into a joint venture with DF Factors in favour Fits in with Su s need to make the world a better place it offers a real opportunity to save lives A nice fit with DF s project Increased world profile for AS Opportunities for changes in jobs for employees managers Opportunity to expand and restructure A form of diversification Further benefits to more communities in Afghanistan However Managers would not like the changes smaller span of control less empowerment Possible production problems diseconomies of scale Dangers of growing too quickly Afghan project comes second AS would have to change the way it operates Marks should be allocated according to the markbands on page 6 If discussion is one sided award a maximum of 5 Both sides considered good use of evidence particularly from section B but no effective recommendation contrast award a maximum of 8 For full marks a fully supported recommendation with good use of evidence particularly from section B 10

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2 M18 3 BUSMT HP2 ENG TZ0 XX Section A Answer one question from this section 1 Visionary Toys VT Visionary Toys VT produces highly innovative toys for children VT began operation in January 2017 and its unique selling point proposition USP is producing toy parts with a 3D printer VT uses the reducing balance method of depreciation 3D technology changes rapidly and the financial directors are also considering ways of reducing VT s tax liabilities in 2018 The financial director presented financial information for VT at the end of 2017 Table 1 Revenue and expense information for the year 2017 and balance sheet items at 31 December 2017 Cash Net fixed assets Interest paid Creditors Debtors Accumulated retained profit end of 2017 Costs of goods sold Sales revenue Short term loans Overdraft balance Expenses Share capital Dividends paid Long term liabilities Stock of toy parts 1000 27 000 250 4000 3500 10 000 7500 27 250 1500 2000 7000 13 500 2500 5000 4500 Source International Baccalaureate Organization 2018 a Define the term unique selling point proposition USP 2 b i Construct a fully labelled balance sheet for VT for the end of 2017 5 ii Calculate the acid test quick ratio for VT for 2018 1 c Explain one reason for VT to use the reducing balance method of depreciation 2

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3 2 M18 3 BUSMT HP2 ENG TZ0 XX Jill Anderson Jill Anderson operates a restaurant Although Jill s meals are viewed as being excellent quality sales are slowing Jill is considering replacing existing meals with gluten free meals The following financial and forecast information is for the month of May 2018 Jill s restaurant can only produce either existing or gluten free meals Table 1 Existing meals Average price of existing meals 8 Rent 2000 per month Variable cost per unit of existing meals 5 Sales of existing meals served 800 per month Jill s salary 400 per month which is paid irrespective of the level of sales Table 2 Estimated costs and price if Jill produces the gluten free meals Average estimated price of gluten free meal 14 Variable cost per unit of gluten free meals 10 Sales forecast of gluten free meals 1200 per month Fixed cost increase for new machinery per month 400 A local gluten free manufacturer which is not part of Jill s existing supply chain has offered to supply already prepared gluten free meals at 8 per meal Jill is unsure whether to make or buy the gluten free meals Source International Baccalaureate Organization 2018 a Define the term supply chain 2 b Calculate c i the total contribution of existing meals sold per month show all your working 2 ii the total profit or loss on existing meals for May 2018 show all your working 1 iii the forecast profit or loss if Jill decides to make and sell gluten free meals show all your working 2 iv the contribution per unit of a gluten free meal if Jill decides to buy in the glutenfree meals show all your working 1 Using your answer from b iii and iv explain whether Jill should buy in or make the gluten free meals herself 2 Turn over

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4 M18 3 BUSMT HP2 ENG TZ0 XX Section B Answer two questions from this section 3 Speedy Delivery SD Speedy Delivery SD is a private limited company that delivers freshly cooked meals by bicycle SD only delivers Restaurants subcontract SD to deliver meals to customers who place orders online and expect quick and efficient delivery SD has been operating profitably for two years Currently it has the highest market share in the city SD is now facing two issues It operates at 98 capacity utilization Recently some restaurant owners complained to SD that meals arrived late and cold to customers The market for home delivered freshly cooked meals is growing quickly and some new delivery companies have just entered the market The CEO wants to address the delivery quality issues and the threat of competitors two of whom recently merged He is considering an internal growth strategy involving investing in new electric scooters and employing more staff to deliver a greater number of meals more efficiently SD must raise a large sum of finance Major shareholders are in disagreement regarding the internal growth strategy The financial manager has provided some financial information Table 1 Current information Gearing ratio 65 Current ratio 0 9 Gross profit margin GPM 20 Net profit margin NPM 9 Return on capital employed ROCE 4 Debtor days 90 Creditor days 60 Table 2 Predicted return on the investment Average rate of return ARR 6 Payback period 3 2 years Source International Baccalaureate Organization 2018 This question continues on the following page

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6 4 M18 3 BUSMT HP2 ENG TZ0 XX Healthy Start HS Tom Donat started Healthy Start HS a national chain of stores preparing and selling healthy snacks which are produced in batches HS s target market is teenagers and young adults Tom was concerned about high levels of fast food consumption and youth unemployment His vision statement for HS is To encourage life long healthy eating habits and to train school leavers drop outs in acquiring work skills HS hires many school leavers without qualifications Because of the valuable social service that HS provides an independent online media provider will feature HS in a new online reality TV show All employees including managers start at the lowest level of the organizational hierarchy and train on the job Job enlargement job enrichment and intrapreneurship opportunities are available 20 of all profits earned are put back into HS to finance these opportunities Staff turnover is lower than the industry average Competition from global fast food restaurants has intensified Their economies of scale mean that HS struggles to increase its market share Online reviews indicate that some customers perceive HS s snacks as healthy but overpriced and with small sized portions Tom is considering two options Option 1 Implement flow production HS will buy new technology and assign each employee to a specific job on the production line HS will increase portion sizes and keep prices the same Option 2 Implement a new social media marketing campaign linked to the new online TV show The campaign will focus on the health benefits of HS s snacks Source International Baccalaureate Organization 2018 a Describe one role of a vision statement for HS b Explain how the following can benefit HS i job enlargement 2 ii intrapreneurship 2 c Explain two possible economies of scale available to global fast food restaurants but not HS d 2 Discuss the two options that Tom is considering for HS in response to the intense competition 4 10

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7 5 M18 3 BUSMT HP2 ENG TZ0 XX Taxi M TM Taxi M TM operates 2500 taxis in a developing country All drivers are full time employees and have a professional taxi license Although not compulsory TM regularly conducts safety inspections of the taxis Though safe most of TM s taxis are old and TM charges high prices Many customers complain However a multinational company RE with offices around the world has started to offer a mobile application app called Best Taxi BT Using their mobile phones passengers can use BT to book and pay for a car journey Any car owner can offer journeys through BT For security reasons the BT app registers passengers and drivers personal details TM s sales are falling and profits are down A number of TM s drivers are becoming demotivated Facing lower incomes poor management and rumours of redundancies many loyal drivers have left to offer taxi services using their own cars and the BT app Some of these drivers are earning considerably higher wages than before The situation for TM appeared critical However local media have reported a higher rate of road accidents by BT drivers than licensed taxi drivers Several of its drivers have assaulted and robbed customers In response TM s management decided to downsize and differentiate itself from BT by positioning its service as a high price high quality traditional taxi service TM will sell older cars and lease new luxury cars develop a unique selling point proposition USP emphasizing comfort and safety Customers can book taxis by telephone and by stopping them in the street TM s target market will be business people higher income families and passengers concerned about safety Source International Baccalaureate Organization 2018 a Define the term redundancy 2 b Explain one positive and one negative impact of the multinational company RE on the developing country 4 c With reference to Maslow s motivation theory explain two reasons that some TM drivers left to drive for BT 4 d Discuss the new strategy to differentiate TM from BT 10 Turn over

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5 M18 3 BUSMT HP2 ENG TZ0 XX M The markbands and assessment criteria on pages 5 7 should be used where indicated in the markscheme Marks 0 1 2 Level descriptor The work does not reach a standard described by the descriptors below 3 4 5 6 7 8 9 10 Little understanding of the demands of the question Few business management tools where applicable techniques and theories are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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6 M18 3 BUSMT HP2 ENG TZ0 XX M Assessment criteria for Section C Criterion A Knowledge and conceptual understanding This criterion addresses the extent to which the candidate demonstrates knowledge and understanding of the given concepts and relevant business management content theories techniques or tools depending on the requirements of the question Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Superficial knowledge of the given concepts is demonstrated Business management content is not selected or the content selected is irrelevant Satisfactory understanding of one or both of the given concepts is demonstrated Some business management content selected is relevant The relevant content is satisfactorily explained Good understanding of one or both of the given concepts is demonstrated The business management content selected is relevant though it may not be sufficient The relevant content is generally well explained though the explanation may lack some depth or breadth Good understanding of both of the given concepts is demonstrated The business management content selected is relevant sufficient and well explained Criterion B Application This criterion addresses the extent to which the candidate is able to apply the given concepts and the relevant business management content theories techniques or tools depending on the requirements of the question to his or her chosen real world organization s The realworld organization s must not be the organization featured in the prescribed case study for paper 1 Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below The given concepts and or any relevant business management content are connected to the real world organization s but this connection is inappropriate or superficial The given concepts and or relevant business management content are connected appropriately to the real world organization s but this connection is not developed The given concepts and relevant business management content are generally well applied to explain the situation and issues of the real world organization s though the explanation may lack some depth or breadth Examples are provided The given concepts and relevant business management content are well applied to explain the situation and issues of the real world organization s Examples are appropriate and illustrative

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7 M18 3 BUSMT HP2 ENG TZ0 XX M Criterion C Reasoned arguments This criterion assesses the extent to which the candidate makes reasoned arguments This includes making relevant and balanced arguments by for example exploring different practices weighing up their strengths and weaknesses comparing and contrasting them or considering their implications depending on the requirements of the question It also includes justifying the arguments by presenting reasonable evidence or other support for the claims made Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Statements are made but these are superficial Relevant arguments are made but these are mostly unjustified Relevant arguments are made and these are mostly justified Relevant balanced arguments are made and these are well justified Criterion D Structure This criterion assesses the extent to which the candidate organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction a body a conclusion fit for purpose paragraphs Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Two or fewer of the structural elements are present and few ideas are clearly organized Three of the structural elements are present or most ideas are clearly organized Three or four of the structural elements are present and most ideas are clearly organized All of the structural elements are present and ideas are clearly organized Criterion E Individuals and societies This criterion assesses the extent to which the candidate is able to give balanced consideration to the perspectives of a range of relevant stakeholders including individuals and groups internal and external to the organization Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below One individual or group perspective is considered superficially or inappropriately One relevant individual or group perspective is considered appropriately or two relevant individual or group perspectives are considered superficially or inappropriately At least two relevant individual or group perspectives are considered appropriately Balanced consideration is given to relevant individual and group perspectives

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8 M18 3 BUSMT HP2 ENG TZ0 XX M Section A 1 a Define the term unique selling point proposition USP 2 A unique selling point is any aspect of the organization brand or product that enables differentiation in consumers minds from competitors N B no application required Do not credit examples Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition that conveys knowledge and understanding similar to the answer above There should be some reference to differentiation from competition Candidates may refer to either the product or brand aspect of the organisation only b i Construct a fully labelled balance sheet for VT for the end of 2017 Balance sheet for VT for the end of 2017 Fixed assets Less accumulated depreciation Net fixed assets 27 000 Accept 0 next to the above or accept just Net fixed assets Current assets Stock 4500 Debtor 3500 Cash 1000 Total CA 9000 Current liabilities Overdraft Creditors Short term loans Total CL 2000 4000 1500 7500 Net current assets working capital 1500 9000 7500 Total assets less current liabilities Long term liabilities 28 500 5000 Net assets 23 500 Financed by Share capital Retained profit Equity 13 500 10 000 23 500 5

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9 M18 3 BUSMT HP2 ENG TZ0 XX M Accurate presentation refers to the correct heading sub heading and to the inclusion of all and only the relevant figures Allow OFR The presentation of the B S can be done in one column Award 0 if the B S does not reach a standard described below Award 1 if the B S is not accurately constructed and or the calculations within and between the various components are not presented or largely incorrect However there is limited evidence of a general understanding of the format More than four mistakes omissions are evident Deduct 1 mark for each irrelevant addition of figures irrelevant heading omission which includes the overall heading Award 5 if the B S is accurately constructed in the expected IBO format All the relevant headings of each component parts are used and correctly classified Do not penalise for internal order of classification All and only the relevant figures are presented No extra irrelevant figures that belong to the P L are included The calculations under each part component of the B S are correct and well presented To get full marks the candidate has to present the format in full as presented in the IB programme For example the presentation calculation of working capital the subtraction of LTL to arrive at Net Assets N B If the candidate did not follow the IBO format award up to 2 marks ii Calculate the acid test quick ratio for VT for 2018 1 Current assets 9000 Stock 4500 Current liabilities 47 500 Acid test ratio 9000 4500 0 6 7500 Award 1 for a correct answer As the formulae is given and the question does not specifically ask for working do not penalize for a lack of working However do not credit 0 6 expressed in percentage or

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10 c M18 3 BUSMT HP2 ENG TZ0 XX M Explain one reason for VT to use the reducing balance method of depreciation Using the reducing balance method of depreciation will reflect the reality of depreciation better The use of percentage will result in higher depreciation figures in the early life of the asset As a highly innovative 3D printer is used it is likely given fast changing technology that this asset depreciates more rapidly at a higher rate in the early part of the product life cycle and at a slower rate later on Hence the B S figures for each year will be more realistic and be balanced overall Therefore VT s balance sheet net fixed assets will reflect more accurately the real value of its fixed assets If the financial manager uses the reducing balance the allowance will be higher in the early years of 2017 18 hence net profit before interest and tax is lower and therefore VT s tax bill will be lower In line with the financial manager s objective Accept any other relevant explanation Award 1 for a relevant generic reason identified or described and 1 for any additional explanation in context 2 cannot be awarded for the reason if the response lacks either explanation and or application The exact advantage impact reason to the organisation must be explained For example realistic for what Accuracy of the B S payment of lower taxes earlier in the life of the machine before a replacement for example for an identification or a description of one reason with or without application 1 for explanation of one reason with no application 1 for explanation of the limitation and application 2 2

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11 2 a M18 3 BUSMT HP2 ENG TZ0 XX M Define the term supply chain 2 The term supply chain refers to a system a process of organising people activities information and resources to move a product or service from supplier to customers end users Award 1 if the definition is only partial or considers supply chain as the same as distribution channel Award 2 for a definition similar to the one above which looks as supply chain as the whole mechanism of production from raw material purchase to final delivery b Calculate For any calculation do not penalise for the lack of sign i the total contribution of existing meals sold per month show all your working 2 The contribution per unit of existing meals 8 5 3 Number of meals sold 800 Total contribution of existing meals sold per month 800 3 2400 Award 2 for a correct final answer of 2400 with full working Award 1 for a correct answer without working Do not credit when only contribution per unit is presented as a final answer ii the total profit or loss on existing meals for May 2018 show all your working TR TC profit 8x800 2400 5x800 6400 2400 4000 6400 6400 0 Accept any other method of working Candidates are not expected to set out their answer in this manner Award 1 for a correct answer with working Candidates do not need to state that Jill is breaking even As the question asks for working 1

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12 iii M18 3 BUSMT HP2 ENG TZ0 XX M the forecast profit or loss if Jill decides to make and sell gluten free meals show all your working 2 Contribution 14 10 4 per meal Total contribution 1200 x 4 4800 Total forecast profit 4800 2400 400 extra fixed cost for gluten meals Total forecast profit 2000 OR Profit TR TC Profit 14 x 1200 2800 1200 x10 Forecast profit 16 800 14 800 Forecast profit 2000 Award 1 if there is one error in calculation eg forgetting to add the extra fixed cost component or the correct answer is given but there is no working Award 2 for both the correct answer and clear and suitable working iv the contribution per unit of a gluten free meal if Jill decides to buy in gluten free meals show all your working 1 The contribution per meal if Jill decides to buy in 14 8 6 Award 1 for the correct answer only with working shown c Using your answer from b iii and iv explain whether Jill should buy in or make the gluten free meals herself Buys in 1200x 14 2400 1200x 8 16800 2400 9600 16800 12000 4800 profit Which is 2800 higher than in iii the cost to make with profit of 2000 Candidates do not have to repeat all of the working above if presented in the previous answers especially in b iii Or Buys in 12000x 6 2400 using contribution method 16800 2400 9600 7200 2400 4800 profit 16800 12000 4800 profit Which is 2800 higher than the profit of 2000 if she makes them herself in part iii Accept any other method 2

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13 M18 3 BUSMT HP2 ENG TZ0 XX M Given the nature of the question regarding reference to b iii and iv it is expected that the candidates incorporate references to the change in contribution and or profit Award 1 for just using the extra contribution to support but without reference to or calculation of profit before and after Award 1 for a response that mentions some relevant qualitative issues with reference to or comparison with the option to make Award 2 for a correct numerical answer with some references to the exact figures of profit before and after Do not credit a response that just says that Jill should accept the offer without any calculation or reference to profit or contribution when buying Please note Some candidate just referred to a fall in fixed cost not to contribution or profit Do not award Do not credit a response that does not demonstrate some attempt to calculate the option of buying or refer to profit after buying Allow OFR

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14 M18 3 BUSMT HP2 ENG TZ0 XX M Section B 3 a Define the term market share 2 Market share can be defined as a percentage of an organization s total sales revenue in relation to the total market sales revenue within a specific industry Accept any other relevant definition N B no application required Do not credit examples Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition that conveys knowledge and understanding similar to the answer above A candidate must demonstrate an understanding that the market share is measured as a percentage for 2 Accept the formula as an indication of percentage b Explain one advantage and one disadvantage for SD of working at almost full capacity utilization Referring to the 98 capacity utilization as mentioned in the stimulus should not be treated as application Some of the advantages of working at almost full capacity utilization Almost full capacity utilization indicates that there is sufficient demand for SD All resources are nearly fully utilized in this case the delivery people so it is likely that their financial rewards are higher especially if paid by meals delivered Even if a fixed salary is paid high demand at near full capacity utilization may provide opportunities for working overtime Constant work could also increase the motivation of the delivery people due to job security If a fixed salary is paid SD does not pay its workers for idle time Better financial management is evident as can be seen by the high 20 GPM Due to satisfying the assumed high demand the profit is likely to increase See figures presented Disadvantages SD flexibility might be reduced if a new organization approaches it to act as a subcontractor SD will lose out on potential new clients in the currently growing market and growing competition for home delivered freshly cooked meals The cyclists delivery people may be overworked and unmotivated Accidents are more likely to occur when the cyclists are rushed to deliver Quality compromised and SD might lose some contracts especially as more competitors are entering the markets There is evidence in the stimulus of some late deliveries which reduced the quality of the meals delivered The bicycles are more likely to break down leading to increased costs and further delay of the arrival of the meals to customers SD will lose many contracts especially as a stronger competitor is entering the market SD s highest market share power will be eroded Accept any other relevant and applicable advantage disadvantage Mark as 2 2 4

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15 M18 3 BUSMT HP2 ENG TZ0 XX M Award 1 for identifying or describing the advantage disadvantage for working at full capacity and a further 1 for a development with respect application to SD Award a maximum of 2 2 cannot be awarded per advantage disadvantage if the response lacks either explanation and or application For example for an identification or a description of an advantage disadvantage with or without application 1 for explanation of an advantage disadvantage with no application 1 for explanation of an advantage disadvantage and application 2 c Explain one advantage and one disadvantage for SD of using an internal growth strategy Internal growth strategy is proposed It is expected that candidates describe the nature meaning of this type of growth where the company grows from within using their own resources and capabilities to expand and grow in size market share by investing in scooters and employing more staff to deliver the meals Advantages The management of SD will have full control of the process of growth in terms of speed priorities and the amount of capital spent As the stimulus outlines a large amount of finance is needed and the management could decide on the number of scooters etc There will be no need for consultation and discussion with another organization be it through merger takeover joint venture or strategic alliance Therefore SD can react quickly to the current problem of late deliveries It appears that SD is a successful company given the profit margins and perhaps operating within a successful organizational culture SD will not lose its independence and or culture Nor will it experience any cultural clashes with the management and employees of a different organisation Less change management is required less disruption to SD Internal growth is likely to be cheaper than the external growth option of takeover However the stimulus outlines that a lot of capital has to be raised so this option is theoretical rather than applicable Nevertheless the 6 return on the investment in scooters is relatively high and the investment is profitable The proposed internal growth strategy will make the working life of the staff easier and more efficient Motivation is likely to increase Disadvantages This method of growth is considerably slower compared to external growth SD might not be able to compete with the newly merged competitors who are likely to be stronger SD is likely to struggle against the new competitor and lose its current market leader position SD will not be able to take immediate advantage of the growing market as the CEO plans Some shareholders are against this option perhaps due to a large sum of finance being required Shareholders tends to expect short term quick results dividends and are likely to block the proposal The proposed option is against the current trend of consolidation SD might not be able to compete with the newly created powerful competitor 4

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16 M18 3 BUSMT HP2 ENG TZ0 XX M Please note that while some text books may say that internal growth is cheaper there is an indication in the stimulus that this particular option may pose a financial challenge to SD Options such as a strategic alliance or franchising could be cheaper Accept any other relevant applicable advantage disadvantage Mark as 2 2 Award 1 for identifying or describing the advantage disadvantage of internal growth and a further 1 for a development with respect to SD Award a maximum of 2 2 cannot be awarded per advantage disadvantage if the response lacks either explanation and or application For example for an identification or a description of an advantage disadvantage with or without application 1 for explanation of an advantage disadvantage with no application 1 for explanation of an advantage disadvantage and application 2 d Discuss two appropriate sources of finance for SD to purchase the scooters Some of the possible sources of finance Issuing more shares as a private limited company SD can definitely issue more shares Currently SD is highly geared 65 so the option of shares might be an appropriate one especially if the banks will not offer finance Issuing shares will not require any payback of the loans and will not subject SD to vulnerability of interest rate fluctuations GPM 20 NPM 9 are healthy in this industry so dividends are likely to be paid The payback is relatively short and the ARR is quite high reasonable If the current shareholders buy extra shares ownership will not be diluted if other friends and family buy the shares the current shareholders control might be diluted and they may raise objections However the current shareholders still control who buys the shares Control will be not lost Going public IPO an expensive and very time consuming source of finance that may not be judged as suitable for SD as a quick reaction to the competitors is needed However SD can raise a significant amount of finance needed to purchase the scooters which is much needed as stated in the stimulus Ownership may be diluted with a risk of losing control However a very low current ratio of 0 9 indicates liquidity problems which might deter investors Long term bank loans If agreed the money can be given quickly quicker than issuing shares this is a very significant advantage for SD given the urgent need for action However the banks will be worried about SD being highly geared with its current obligation to pay interest as well as to pay back the loan Moreover given the low current ratio it is likely that the bank s financial manager will refuse the loan due to liquidity problems Also SD does not manage its short term liquidly see debtors and creditors hence the bank may be worried of insolvency 10

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17 M18 3 BUSMT HP2 ENG TZ0 XX M Leasing the scooters could provide a good solution for SD The scooters can be leased quickly and maintained by the leased company This fits the managers objectives of a quick response SD will pay a relatively small amount every month which mitigates the problem of raising a large sum pf money However while if bought the scooters will become SD fixed assets after 3 2 years payback if leased they will never be SD s Still one may judge this issue as less significant as the need for a quick reaction is vital Venture capitalists business angel As SD is highly geared coupled with the likelihood that the banks refuse a loan the use of the above might seem highly suitable especially if there is potential to make a quick significant profit as seen given the GPM 20 and NPM 9 However venture capitalists business angels might be reluctant to join SD due to the merger between competitors and some discord with shareholders re the methods of growth However a very low current ratio of 0 9 indicates liquidity problems which might deter investors Accept different arguments for the above option if fully justified Using retained profit SD is profitable GPM is 20 and NPM is 4 While we do not know the industry norm one may judge this option as highly suitable as SD will not be subject to fluctuating interest rates and repayments It is also likely that being Ltd the shareholders will agree to have less dividends to pursue the strategic option of internal finance However some shareholders might object to this option Despite the percentage given of the profit margin it might not be sufficient to generate the large sum of finance required and SD might have to opt for external source of finance Sell fixed assets The main assets are bicycles Selling these assets can generate some finance However it might be judged as a limited source method to raise finance as the bikes will not generate the cash needed if any Another possibility is to sell some fixed assets like the office Accept different arguments for the above option if fully justified Please note Long term or medium term sources of finance only should be considered Do not accept some short term sources of finance such as an overdraft short term loan or creditors Accept debtors or debt factoring if the candidate comments on their unsuitability given the liquidity problem Accept loan If the candidate wrote short term loan instead of just loan but the arguments for against are relevant applicable give some credit It is expected that the candidates suggest the suitability or otherwise of two different sources of finance Within the above categories candidates can suggest any source of finance including some which might not be highly appropriate as long as they evaluate the appropriateness of their chosen sources Candidates are expected to use the financial information provided as part of their evaluation Not using any quantitative information reduces the quality of application and makes the response rather generic therefore award up to 5 marks Candidates should not divert into a solution to some cash flow problem given the debtor and creditors ratios It is not expected that the candidate incorporate all of the above arguments

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18 M18 3 BUSMT HP2 ENG TZ0 XX M Accept any other relevant issue Accept any other relevant discussion A conclusion with judgment is expected A balanced response is one that covers at least one issue argument for and at least one argument against each option Marks should be allocated according to the markbands on page 5 with further guidance below For one relevant issue that is one sided award up to 3 For more than one relevant issue that is one sided award up to a maximum of 4 Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgment conclusion Candidates cannot reach the 7 8 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer

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19 4 a M18 3 BUSMT HP2 ENG TZ0 XX M Describe one role of a vision statement for HS 2 The role of a vision statement for HS is to inform different stakeholders of its preferred ideal future direction aspiration regarding life long healthy eating habits and the recruitment of school levers This will help HS to set long term objectives regarding life long healthy eating habits recruitment of school leavers It is likely to act as an important driver for recruitment selection and motivation of its young unskilled workforce made up of school leavers Award 1 for describing one role of a vision statement Award an additional 1 when candidates apply their response to the stimulus Award 1 if only a definition of vision statement is given rather than the role b Explain how the following can benefit HS Please note that the question is about the benefits to an organisation HS not to the employees Do not credit just the benefits to employees without further explanation as to how any organisation which may be HS will benefit i job enlargement 2 Job enlargement will increase the range of skills and tasks able to be performed by the school leavers but at the same level in HS The school leavers lack direct experience of working and qualifications for work in a national chain and or batch production Job enlargement will give the school leavers the chance to acquire new skills before they can experience some job enrichment and become future managers The employees will become more motivated with all the associated benefits to HS such as improved quality of their food increased output due to being more efficient costs reduction due to economies of scale and consequently be able to compete with the global fast food providers Award 1 for identification of an appropriate benefit to an organisation which may be HS and an additional 1 for an explanation of the benefit and application to the stimulus Application may not be merely nominal ii intrapreneurship Intrapreneurship allows for risk taking creativity and innovation by employees within HS without taking their own financial or any other risks The risk is on HS Given the intense competition from the global fast food restaurants the opportunity to school leavers to develop new healthy snacks or find ways of reducing the portion will be vital to maintain market share as well as keeping up with fulfilling HS s social vision Award 1 for identification of an appropriate benefit to an organisation which may be HS and an additional 1 for an explanation of the benefit and application to the stimulus Application may not be merely nominal 2

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20 M18 3 BUSMT HP2 ENG TZ0 XX M For example for an identification or a description of a benefit to an organisation with or without application 1 for explanation of a benefit to an organisation with no application to HS 1 for explanation of a benefit and application to HS 2 c Explain two possible economies of scale available to global fast food restaurants but not HS Possible economies of scale available to the global fast food restaurants include Marketing economies of scale the global fast food companies are likely through their global reach to experience significant economies of scale in marketing selling across a whole range of markets HS is a national chain and will not be able to spread advertising promotion costs for example across a whole range of markets Unit costs of marketing will be much lower for the global restaurants Bulk buying economies of scale to develop and meet global demand and to fill supply chains global fast food manufacturers are likely to achieve significant economies through the bulk purchase of raw ingredients a number of fast food manufacturers have vertically integrated with suppliers to ensure that logistics are in place Again unit costs of operations are likely to be lower than HS s Financial economies of scale being present in global markets allows global fast food manufacturers to borrow funds for expansion at much lower rates than a national chain It is indicated in the stimulus that HS finances its training and professional development through retained profits Accept any other relevant economy of scale Mark as a 2 2 Do not credit just a definition of the term Award 1 for identification description of an appropriate economy of scale and an additional 1 for an explanation and application to the stimulus Application may not be merely nominal It is expected that the candidates refer to lower costs per unit rather than just lower costs Maximum award per economy of scale 2 4

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21 d M18 3 BUSMT HP2 ENG TZ0 XX M Discuss the two options that Tom is considering for HS in response to the intense competition The first option which is to implement flow production is likely to lead to an increase in production and productivity because of the new technology and specialized roles Currently HS uses batch production With improved productivity HS can increase its portion size without raising prices This will address the criticism found in the on line review about the portion size HS will be perceived as more customers focus As a result HS may be able to compete more effectively with the global fast food manufacturers However the introduction of flow production may result in a reduction in the opportunities for job enlargement enrichment and intrapreneurship If the new production process is going to lead to specific jobs on the production then apart from job rotation the current employees may become demotivated through a restriction on personal growth and development opportunities Staff turnover may increase as employees seek more innovative or challenging work Moreover the above may contradicts the vision statement of HS It is likely to be expensive to implement flow production both in terms of the financing and inevitable changes in organizational culture at HS Reduced profit to be put back into HS to finance job opportunities for the school leavers also contradicts HS s vision statement One may judge the erosion of the vision statement as a significant arguments against this option The second option may be quicker to organize and much cheaper The online reality TV show will have established HS firmly in the minds of existing and potential customers A social media campaign will amplify the brand value of HS and should increase market share HS will directly communicate with its target market who also express their discontent using social media However measuring the success of social media on market share will be difficult even though the target market should be familiar with this method of promotion The biggest argument fr against this campaign however is that as a competitive tool against the global manufacturers it might not be successful Emphasising the health benefits of the smack does not address the problem of the portion It does not mention in the stimulus that there is an issue with HS s perceived health benefits There will still be this perceived difference in portion size A social media campaign will not address this aspect In fact there is a danger that negative response to the campaign make reduce market share even further Both of the responses have some merit but it would appear that the first option is the most appropriate to tackle the issue of competition with the global fast food manufacturers The changes in the production process will take some time to bed in and a few staff may leave to work for other snack food manufacturers who have more dynamic or challenging roles However the social media campaign will not close the perceived gap between the products offered by HS and those offered by their competitors and thus could backfire Candidates are expected to provide conclusions and judgments for top marks Candidates may conclude that either option is better or they may conclude that HS should do both given that Option 2 would not be very expensive Marks should be allocated according to the markbands on page 5 10

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23 5 a M18 3 BUSMT HP2 ENG TZ0 XX M Define the term redundancy 2 When the business can no longer afford to employ a worker or the job does no longer exist or is considered necessary hence a person is unemployed The business is eliminating the role N B no application required Do not credit examples Candidates are not expected to word their definition exactly as above Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition that conveys knowledge and understanding similar to the answer above Redundancy occurs through no fault of the employee b Explain one positive and one negative impact of the multinational company RE on the developing country Positive impacts on the developing country TM has new competition consumers will have access to different taxi services hence more choice at lower prices for the consumers Tax revenue to the government of the developing country from profits made by RE taxi drivers Working opportunities for drivers in the developing country will grow as any person with a car can download the BT app and begin his her employment Income will increase standards of living will improve Also for drivers at TM there will be job creation and job security In the future RE with a possible increase in demand for the BT app may increase capital spending infrastructure to manage operations The developing country will benefit from an increase in economic activity Technological transfer the introduction of the BT app can be used in other industries to improve efficiency Negative impacts on the developing country BT s competition is threatening TM s market position and even forcing it out of business RE as a multinational company is probably a powerful company which makes TM s survival even more difficult TM as a local business cannot compete and has started to experience a fall in sales and profit TM might end up closing and this would lead to increased unemployment in the country which may result in the government intervening to ensure that the political fallout from such a move is minimized RE takes advantage of a lack of compulsory regulation and BT drivers have a higher rate of road accidents as well as safety issues assaults and robbery Profits from RE could be repatriated to their home country The financial benefits may be limited this argument is not really applicable Award 1 for theoretical possibility Accept any other relevant positive negative impact Mark as 2 2 Award 1 for identifying or describing one positive negative impact for TM and a further 1 for a development with respect to TM Award a maximum of 2 4

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24 M18 3 BUSMT HP2 ENG TZ0 XX M 2 cannot be awarded per advantage disadvantage if the response lacks either explanation and or application For example for an identification or a description of a positive negative impact with or without application 1 for explanation of a positive negative impact with no application 1 for explanation of a positive negative impact and application 2 c With reference to Maslow s motivation theory explain two reasons that some TM drivers left to drive for BT Maslow s physical needs refer to the basic physiological requirements of food water and shelter As TM drivers incomes are falling they may not be able to earn enough money to meet essential needs Therefore even the lowest level of needs is not fulfilled hence the drivers are demotivated They will leave TM for BT as it seems that many drivers are making considerably more money Maslow s safety needs refer to the needs of security and protection TM drivers may want to meet safety needs such as job security TM is experiencing financial problems and there are rumors of redundancies Uncertainty at TM could force many drivers to quit TM to a more stable position Poor management may lead to a lack of love and belonging on the part of the workers There is evidence implied by the stimulus of a lack of teamwork and cooperation as TM s drivers are effectively self employed Therefore it could argued that TM s drivers cannot reach the third level Love and belonging If the candidate does not use Maslow s exact classification of any need Award 0 The inability to fulfil the higher level of needs are not relevant applicable in this case Only credit relevant needs based on the stimulus Given that only 2 marks are available per need a full explanation of the Maslow theory model is not expected Mark as 2 2 For each need for an identification or a description of one relevant Maslow need with or without application 1 for explanation of one relevant Maslow need with no application 1 for explanation of one relevant of Maslow needs with and application 2 Award a maximum of 4 in total 4

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25 d M18 3 BUSMT HP2 ENG TZ0 XX M Discuss the new strategy to differentiate TM from BT The focus of this question is on differentiation in the eyes of the customers TM s new strategy is to downsize and reposition the company as a high price and high quality traditional taxi service Customers that are willing and able to pay for a more exclusive service will probably find the service attractive This will put TM in a different target segment and will enable differentiation form BT Current security and safety problems due to customers being assaulted by BT drivers and the higher rate of road accidents could help TM to develop a unique selling point emphasizing the fact that all TM drivers have professional licenses and cars have regular safety inspections Leasing new luxury cars seems to be a good financial and operational alternative for TM as they won t need to cash purchase the new vehicles New luxury cars emphasize TM s USP regarding comfort and differentiation from BT Moreover the taxi can be upgraded and regularly serviced for extra comfort to the newly targeted segment Furthermore customers are unlikely to be concerned whether the taxis are leased or not This issue can be judged as of minimal no importance Leasing is cheaper in the short term and might enable TM to stay competitive in terms of quality price ratio Technology can be a barrier for many people such as using mobile apps or even smart phones Many customers especially the elderly groups will find it simpler to telephone for a taxi instead of using a mobile app On the other hand Using a mobile app to book and pay for a taxi service can be difficult for some groups of consumers the increasing usage of technology and mobile apps shows that BT is very practical for most groups of potential consumers BT as a multinational company is a strong competitor for TM probably benefitting from managerial and marketing economies of scale They may also introduce a service offering an exclusive maintenance that will compete with TM s new market positioning TM cannot patent their new service The idea service is very easy to copy especially by a MNC Leasing is usually an expensive option in the long term as payments will have to be made over the duration of the agreement However this point does not impact on differentiation unless TM increases its price and becomes uncompetitive This is unlikely Accidents could be reduced if BT makes professional driving license a compulsory requirement to become a driver Getting a professional driving license is not an important barrier of entry for BT TM s USP is easy to imitate and could be quickly eroded Overall TM is in a very delicate situation BT is a strong competitor and threatens TM s market position Although the new positioning strategy has several weaknesses it is a viable alternative to try in the short term before BT or other competitors move in TM may be able to benefit significantly from first mover advantage Otherwise survival of the company is at stake Marks should be allocated according to the markbands on page 5 It is not expected that the candidate incorporate all of the above arguments Accept any other relevant issue Accept any other relevant discussion A conclusion with judgment is expected 10

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26 M18 3 BUSMT HP2 ENG TZ0 XX M A balanced response is one that covers at least one issue for and at least one argument against each action or the candidates may answer holistically by providing at least two arguments for and two arguments against repositioning For one relevant issue that is one sided award up to 3 For more than one relevant issue that is one sided award up to a maximum of 4 Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgment conclusion Candidates cannot reach the 7 8 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer

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27 M18 3 BUSMT HP2 ENG TZ0 XX M Section C Questions 6 8 Please mark the candidate response using the assessment criteria on pages 6 7 6 7 8 With reference to an organization of your choice examine the impact of globalization on human resources strategy 20 With reference to an organization of your choice examine the impact of ethics on organizational change 20 With reference to an organization of your choice examine the impact of innovation and culture on an organization 20 N B When the question asks for the application of one concept on another it is still expected that Business Management content will be aligned with the concepts especially the second concept the one being acted on Please note that candidates can conclude that there was a minimal impact however it has to be based on balanced arguments and evaluation Additional guidance in relation to the assessment criteria For each criterion the aim is to find the descriptor that conveys most accurately the level attained by the candidate using the best fit model It is not necessary for every single aspect of a level descriptor to be met for that mark to be awarded The highest level descriptors do not imply faultless performance and should be achievable by a candidate A candidate who attains a high level of achievement for one criterion will not necessarily reach high levels of achievement for the other criteria and vice versa If only one concept is addressed Criteria A B C and E award up to a maximum 3 Criterion D full marks can be awarded Where the question asks for impacts of two concepts on content examiners must allow for unbalanced treatment of the two concepts throughout a candidate s response One concept may be more significant than the other Criterion B For 1 connection is inappropriate ignore superficial For 2 connection is not developed should be treated the same as superficial Criterion C 1 1 arguments are expected per concepts Questions 6 and 7 require consideration of the impact of one concept on a second concept therefore accept 2 2 arguments for a balanced response Justification is through logic or data For 2 there is no balance as there are no counter arguments at all or the arguments are all one sided then this would be unjustified For 3 there are some balanced arguments some of which are justified

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28 M18 3 BUSMT HP2 ENG TZ0 XX M Criterion D Introductions need to be concise and related to the question The candidate s response does not to have explicit headings for each structural element A body is the area in which the substance of arguments occurs It is usually located between the introduction and the conclusion Fit for purpose paragraph means that ideas are presented in a clear academic way For example one idea per paragraph Criterion E One example of an individual could be an individual consumer or an individual manager However this cannot be considered with a group of consumers or a management team For 4 a balanced response look at the perspectives of both individual and group s The chosen individual group needs to be applicable and relevant to the question with specific explanation Candidates need to go beyond stating the stakeholder Candidates need not explicitly say stakeholder If a candidate chooses an organization from another part of the exam for example an organization in the stimulus of section B their response should be marked as follows Criterion A Award a maximum of 1 as the candidate might understand the essence of the two concepts but the content selected is irrelevant as the organisation is fictitious but the candidate may display some understanding of the concepts Criterion B Award 0 as there is no connection to a real organization Criterion C Award a maximum of 1 The arguments cannot be relevant and justified as the organisation is fictitious Criterion D Mark as normal Criterion E Award 0 The individual and or group perspective s cannot be relevant if the organisation is fictitious Specific comments Q6 Accept application to human resource strategy Do not accept operations strategy Q7 Accept any relevant organizational change including amajor change in product strategy For example diversifciation Do not accept the simple adaptation of products to different cultures etc as organizational change Accept a relevant example that may demonstrate that ethics had minimal or no impact therefore organizationl change has not occurred Q8 Candidates can choose any aspect of the chosen organization They should introduce the chosen aspects Candidates can choose organizational or national cultures or both

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2 M18 3 BUSMT SP2 ENG TZ0 XX Section A Answer one question from this section 1 Fishers Fishers manufactures baseball caps In 2017 it sold 75 000 caps The variable cost per cap was 6 70 of Fishers s annual sales occur from April to September Starting in March Fishers experiences a significant increase in current assets and current liabilities which start to decrease in October Table 1 Selected data for Fishers for 2017 figures in 000s Sales revenue Fixed costs 900 55 Table 2 Selected forecasted financial information for Fishers for 2018 Increase in number of baseball caps sold Increase in variable costs per cap Fixed costs Interest Income tax expense 10 1 00 55 000 30 000 20 of net profit before tax Sales price per cap will remain the same as in 2017 Source International Baccalaureate Organization 2018 a Define the term current assets b Using Table 1 calculate Fishers s net profit before interest and tax for 2017 show all your working 2 2 c Using Table 2 calculate the following forecasted figures for 2018 d i sales revenue 1 ii total variable costs 1 iii income tax 1 iv net profit after interest and tax 1 Explain why Fishers experiences a significant increase in current assets and current liabilities from March to October 2

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3 2 M18 3 BUSMT SP2 ENG TZ0 XX Visionary Toys VT Visionary Toys VT produces highly innovative toys for children VT began operation in January 2017 and its unique selling point proposition USP is producing toy parts with a 3D printer The financial director presented financial information for VT at the end of 2017 He was concerned about VT s liquidity Table 1 Revenue and expense information for the year 2017 and balance sheet items at 31 December 2017 Cash Net fixed assets Interest paid Creditors Debtors Accumulated retained profit end of 2017 Costs of goods sold Sales revenue Short term loans Overdraft balance Expenses Share capital Dividends paid Long term liabilities Stock of toy parts 1000 27 000 250 4000 3500 10 000 7500 27 250 1500 2000 7000 13 500 2500 5000 4500 Source International Baccalaureate Organization 2018 a Define the term unique selling point proposition USP 2 b i Construct a fully labelled balance sheet for VT for the end of 2017 5 ii Calculate the acid test quick ratio for VT for 2018 1 c Explain one way VT could improve its liquidity 2 Turn over

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4 M18 3 BUSMT SP2 ENG TZ0 XX Section B Answer one question from this section 3 JVS JVS is a successful manufacturer of designer clothing A marketing expert described JVS s brand name Izzys as one of the business s major strengths Because of its market orientation approach JVS spends significantly more on market research than its competitors JVS s products are Izzys a range of high quality fashion jeans which contributes 70 towards JVS s revenue and profit The market for this range is not growing IzzDen a range of denim jackets which is near the end of the product life cycle Manufacturing of this product will cease later this year Izzys and IzzDen are sold through high end independent retailers throughout countries in Europe JVS uses a price leadership strategy for these two products Consumers perceive JVS as fashionable They also believe that JVS s products are worth the premium price JVS is considering launching a new product a range of fashionable shorts Izzless aimed at the 15 19 age group With this product JVS would reach a different but highly competitive market Focus groups revealed that many low income young consumers want to purchase fashion shorts JVS would sell the new shorts to mass market discount retail stores Consumers would also be able to order online for next day delivery Source International Baccalaureate Organization 2018 a State two stages of the product life cycle 2 b Apply the Boston Consulting Group BCG matrix to JVS s current product portfolio 4 c Explain one advantage and one disadvantage for JVS of using focus groups for its market research 4 d Recommend whether JVS should launch the new product Izzless 10

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5 4 M18 3 BUSMT SP2 ENG TZ0 XX Healthy Start HS Tom Donat started Healthy Start HS a national chain of stores preparing and selling healthy snacks which are produced in batches HS s target market is teenagers and young adults Tom was concerned about high levels of fast food consumption and youth unemployment His vision statement for HS is To encourage life long healthy eating habits and to train school leavers drop outs in acquiring work skills HS hires many school leavers without qualifications Because of the valuable social service that HS provides an independent online media provider will feature HS in a new online reality TV show All employees including managers start at the lowest level of the organizational hierarchy and train on the job Job enlargement job enrichment and intrapreneurship opportunities are available 20 of all profits earned are put back into HS to finance these opportunities Staff turnover is lower than the industry average Competition from global fast food restaurants has intensified Their economies of scale mean that HS struggles to increase its market share Online reviews indicate that some customers perceive HS s snacks as healthy but overpriced and with small sized portions Tom is considering two options Option 1 Implement flow production HS will buy new technology and assign each employee to a specific job on the production line HS will increase portion sizes and keep prices the same Option 2 Implement a new social media marketing campaign linked to the new online TV show The campaign will focus on the health benefits of HS s snacks Source International Baccalaureate Organization 2018 a Describe one role of a vision statement for HS b 2 Explain how the following can benefit HS i job enlargement 2 ii intrapreneurship 2 c Explain two possible economies of scale available to global fast food restaurants but not HS d Discuss the two options that Tom is considering for HS in response to the intense competition 4 10 Turn over

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6 5 M18 3 BUSMT SP2 ENG TZ0 XX Creative Software Systems CSS Creative Software Systems CSS a private limited company designs custom software packages for public sector organizations Ebru Aga is the sole shareholder though she is considering an employee share ownership scheme For years CSS managed its employees closely setting individual targets for performance and requiring regular progress reports Following Adams s equity theory CSS tied financial rewards to frequently measured performance outcomes Though managers clearly explained to individual employees how additional financial rewards were linked to specific contributions they made many employees still felt the system was unfair After reading Daniel Pink s theory of motivation Ebru reconsidered her management style and CSS s system of financial rewards She liked when Pink reported that a major American company allowed employees to work 20 of their time on projects of their choice Ebru implemented the following three changes Change 1 Adopting a project based organizational structure for CSS projects Change 2 Eliminating performance related pay PRP Change 3 Allowing employees to spend 20 of their time on any project they wish either one of CSS s or their own dream project Employees reactions were mixed Some employees were thrilled They had many ideas of their own that they wanted to explore Other employees however did not like the change In the 20 of their time given to any project they wished they chose to work on projects given to them by CSS They felt it was unfair Although they were advancing important projects of the company they would no longer get performance related pay PRP while others spent their time on projects that might not contribute to CSS s profitability Source International Baccalaureate Organization 2018 a Define the term public sector 2 b Explain one advantage and one disadvantage for CSS of introducing an employee share ownership scheme 4 c Explain one advantage and one disadvantage for CSS of implementing a projectbased organizational structure Change 1 4 d With reference to Adams s equity theory and Daniel Pink s motivation theory discuss Ebru s decision to eliminate performance related pay PRP Change 2 and to allow employees to spend 20 of their time on any project they wish Change 3 10

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5 M18 3 BUSMT SP2 ENG TZ0 XX M The markbands and assessment criteria on pages 5 7 should be used where indicated in the markscheme Marks 0 1 2 Level descriptor The work does not reach a standard described by the descriptors below 3 4 5 6 7 8 9 10 Little understanding of the demands of the question Few business management tools where applicable techniques and theories are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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6 M18 3 BUSMT SP2 ENG TZ0 XX M Assessment criteria for Section C Criterion A Knowledge and conceptual understanding This criterion addresses the extent to which the candidate demonstrates knowledge and understanding of the given concepts and relevant business management content theories techniques or tools depending on the requirements of the question Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Superficial knowledge of the given concepts is demonstrated Business management content is not selected or the content selected is irrelevant Satisfactory understanding of one or both of the given concepts is demonstrated Some business management content selected is relevant The relevant content is satisfactorily explained Good understanding of one or both of the given concepts is demonstrated The business management content selected is relevant though it may not be sufficient The relevant content is generally well explained though the explanation may lack some depth or breadth Good understanding of both of the given concepts is demonstrated The business management content selected is relevant sufficient and well explained Criterion B Application This criterion addresses the extent to which the candidate is able to apply the given concepts and the relevant business management content theories techniques or tools depending on the requirements of the question to his or her chosen real world organization s The realworld organization s must not be the organization featured in the prescribed case study for paper 1 Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below The given concepts and or any relevant business management content are connected to the real world organization s but this connection is inappropriate or superficial The given concepts and or relevant business management content are connected appropriately to the real world organization s but this connection is not developed The given concepts and relevant business management content are generally well applied to explain the situation and issues of the real world organization s though the explanation may lack some depth or breadth Examples are provided The given concepts and relevant business management content are well applied to explain the situation and issues of the real world organization s Examples are appropriate and illustrative

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7 M18 3 BUSMT SP2 ENG TZ0 XX M Criterion C Reasoned arguments This criterion assesses the extent to which the candidate makes reasoned arguments This includes making relevant and balanced arguments by for example exploring different practices weighing up their strengths and weaknesses comparing and contrasting them or considering their implications depending on the requirements of the question It also includes justifying the arguments by presenting reasonable evidence or other support for the claims made Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Statements are made but these are superficial Relevant arguments are made but these are mostly unjustified Relevant arguments are made and these are mostly justified Relevant balanced arguments are made and these are well justified Criterion D Structure This criterion assesses the extent to which the candidate organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction a body a conclusion fit for purpose paragraphs Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Two or fewer of the structural elements are present and few ideas are clearly organized Three of the structural elements are present or most ideas are clearly organized Three or four of the structural elements are present and most ideas are clearly organized All of the structural elements are present and ideas are clearly organized Criterion E Individuals and societies This criterion assesses the extent to which the candidate is able to give balanced consideration to the perspectives of a range of relevant stakeholders including individuals and groups internal and external to the organization Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below One individual or group perspective is considered superficially or inappropriately One relevant individual or group perspective is considered appropriately or two relevant individual or group perspectives are considered superficially or inappropriately At least two relevant individual or group perspectives are considered appropriately Balanced consideration is given to relevant individual and group perspectives

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8 M18 3 BUSMT SP2 ENG TZ0 XX M Section A 1 a Define the term current assets 2 Current assets are items either owned by a business or owed to that business with a life of less than twelve months Candidates are not expected to word the definition exactly as above N B no application required Do not credit examples on their own though correct examples can provide reinforcement to answers Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition b Using Table 1 calculate Fishers s net profit before interest and tax for 2017 show all your working 2 Sales revenue variable costs fixed costs net profit before interest and tax 900 000 6 75 000 55 000 395 000 To receive 2 candidates must show workings c Using Table 2 calculate the following forecasted figures for 2018 i sales revenue 1 990 000 ii total variable costs 1 577 500 iii income tax 1 65 500 iv net profit after interest and tax 262 000 If a candidate calculates tax before deducting interest expense in question c iii award 0 The answer is incorrect However if the candidate then produces the answer 256 000 for c iv award 1 for that question based upon the OFR Accept responses if candidates do not include 000s 990 577 5 65 5 and 262 Apply OFR where applicable Award 1 for each correct answer up to 4 Candidates are not required to show workings 1

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9 d M18 3 BUSMT SP2 ENG TZ0 XX M Explain why Fishers experiences a significant increase in current assets and current liabilities from March to October In anticipation of increased sales during the period April through September Fishers must increase production starting in March Thus it buys more stock which increases both current assets stock which later become debtors and current liabilities short term borrowings and creditors Fishers maintains this higher volume of trading and levels of current assets and current liabilities until sales start to contract in October In anticipation of lower sales from October through March the reverse of the process above occurs If candidates simply say that the increase is due to peak sales or something very similar do not award credit N B Application may be limited or nominal which is acceptable provided that the response is relevant Award 1 for a basic explanation that conveys partial understanding Award 2 for a full explanation that conveys knowledge and understanding similar to the above 2

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10 2 a M18 3 BUSMT SP2 ENG TZ0 XX M Define the term unique selling point proposition USP 2 A unique selling point is any aspect of the organization brand or product that enables differentiation in consumers minds from the competitors N B no application required Do not credit examples Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition that conveys knowledge and understanding similar to the answer above b i Construct a fully labelled balance sheet for VT for the end of 2017 Balance sheet for VT for the end of 2017 Fixed assets Less accumulated depreciation Net fixed assets 30 000 3000 27 000 Current assets Stock Debtors Cash Total CA Current liabilities Overdraft Creditors Short term loans Total CL 4500 3500 1000 9000 2000 4000 1500 7500 Net current assets working capital 1500 Total assets less current liabilities Long term liabilities 28 500 5000 Net assets 23 500 Financed by Share capital Retained profit Equity 13 500 10 000 23 500 9000 7500 5

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11 M18 3 BUSMT SP2 ENG TZ0 XX M Accurate presentation refers to the correct heading sub heading and to the inclusion of all and only the relevant figures Allow OFR 0 The B S does not reach a standard described below 1 2 The B S is not accurately constructed and or the calculations within and between the various components are not presented or largely incorrect However there is limited evidence of a general understanding of the format 3 4 The principal elements of the B S are constructed but may not be entirely accurate The calculations under each heading component part are largely correct Allow up to two mistakes in calculations and or presentation for 3 Allow for either one error in calculation or one error in presentation 4 For an accurately constructed B S with incorrect calculations award up to a maximum of 3 Allow OFR For example if one irrelevant figure that belongs to the P L account is added obviously the rest will not match 5 The B S is accurately constructed in the expected IBO format All the relevant headings of each component parts are used and correctly classified Do not penalise for internal order of classification All and only the relevant figures are presented No extra irrelevant figures that belong to the P L are included Deduct 1 for one omission including the overall heading provided the B S is accurately balanced N B If the candidate did not follow the IBO format award up to 3 marks ii Calculate the acid test quick ratio for VT for 2018 Current assets 9000 Stock 4500 Current liabilities 7 500 Acid test ratio 9000 4500 0 6 7500 Apply OFR where applicable Candidates are not required to show workings Award 1 for a correct answer 1

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12 c M18 3 BUSMT SP2 ENG TZ0 XX M Explain one way VT could improve its liquidity Ways VT could improve liquidity include attempt to operate with a lower re order level of stock sell fixed assets and lease long term assets pay less in dividends raise capital either more share capital or long term debt Accept any other acceptable and relevant means to improve liquidity If a candidate proposes negotiating longer trade terms with VT s creditors award 1 This response is theoretically correct if all of the funds generated by the longer payment terms are used for no other purpose than building cash Thus while theoretically correct the ATR would go up it is not a particularly useful approach to the problem N B The question provides no real opportunity for application and thus application is not expected However a response must be relevant to receive full marks 2

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13 M18 3 BUSMT SP2 ENG TZ0 XX M Section B 3 a State two stages of the product life cycle 2 Award 1 per stage identified Acceptable answers are Introduction Growth Maturity or Saturation Decline Withdrawal b Apply the Boston Consult Group BCG matrix to JVS s current product portfolio 4 Award 1 for a basic answer that shows some understanding of the Boston Consulting Group matrix Award 2 for an answer that shows a good understanding of the Boston Consulting Group matrix This may be descriptive or in the form of a drawn diagram Award 3 for an answer that shows a good understanding of the Boston Consulting Group matrix and places both of JVS s products Izzys and IzzDen in their correct segments in a BCG matrix or explains their positions Izzys is a cash cow IzzDen is a dog If a candidate correctly links the products to the BCG matrix but provides no explanation Award 1 for each correctly linked product up to a maximum of 2 Example Izzy cash cow IzzDen dog Award 2 For Izzy star IzzDen dog Award 1 If a candidate draws the matrix but does not label the axes but otherwise draws it correctly and correctly links and explains both products to the matrix award 3 If a candidate draws the matrix but does not label the axes but otherwise draws it correctly and correctly links one product award 2 N B Candidates are asked to apply the matrix to JVS s current product range do not penalize if a candidate also includes their proposed product IzzLess and places this as a question mark problem child Award 4 for an answer that shows a good understanding of the Boston Consulting Group matrix and places both of JVS s products Izzys and IzzDen in their correct segments in a BCG matrix or explains their positions AND explains clearly why they are in these segments

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14 c M18 3 BUSMT SP2 ENG TZ0 XX M Explain one advantage and one disadvantage for JVS of using focus groups for its market research Advantages of focus groups include They can provide detailed information about customer feelings perceptions and opinions The introduction of Izzless would represent a risky move by JVS as the mass market product could undermine Izzy s established reputation as high end They are cheaper than performing individual interviews Already JVS spends more on market research than its competitors By relying on focus groups rather than individual interviews JVS can get detailed information at a lower cost than individual interviews They provide opportunities to clarify any issues or problems The target market of Izzless is 15 to 19 year olds many of whom have low incomes JVS has limited to no experience with this group Focus groups which allow for dialogue and back and forth can allow JVS to get a clearer idea of issues and potential obstacles Disadvantages of focus groups include They can be hard to control and manage JVS will probably have two different types of focus groups its traditional customers and the new 15 to 19 year old group who would buy Izzless Especially with the latter group controlling and managing them could prove challenging the results are difficult to analyse Focus group feedback can be inconsistent and contradictory a problem made worse because of the young age of participants Members may not reveal their own feelings but are swayed by the majority view This potential problem is true of any focus group but is especially heightened for the product Izzless Teenagers tend to be more swayed by peer pressure than other groups They may not be representative of the target market as a whole Unless JVS is willing to go to considerable expense to have focus group participants flown in from across its market area all of Europe participants are likely to come from a handful of cities or as few as one or two cities These participants may not be representative of the whole market Accept any other relevant advantage disadvantage However advantages and disadvantages that could apply to any form of market research should not be credited Accept any other relevant explanation N B Just using the name JVS does not constitute application to the stimulus Mark as 2 2 Award 1 for each correct advantage disadvantage identified or described and 1 for a relevant explanation with application to JVS Award up to a maximum of 2 Candidates should not be awarded 2 per advantage disadvantage if the response lacks either explanation or application 4

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15 d M18 3 BUSMT SP2 ENG TZ0 XX M Recommend whether JVS should launch the new product Izzless JVS currently only has two products in its portfolio and will cease production of one of them IzzDen later this year A business with just one product puts itself in a dangerous position as if demand for that product falls the business could faces losses and possibly failure The launch of the new product would take the business into a new market targeting low income young consumers want to purchase fashion shorts It would also broaden JVS s distribution channels as it would now use mass market retail discount stores and online delivery at present the business only sells through high end independent retailers Low income consumers may relish the chance to buy shorts that have a brand name that is associated with high quality and designer fashion at affordable prices this may give JVS a competitive edge in this highly competitive market However the move is not without risk The market is very competitive and JVS s products may not be able to establish a foothold in the market There is also the danger that this new product may impact of the sales of their cash cow Izzys This down market product may damage its brand image which according to a marketing expert is one of the business s major strengths It would end up with two products aimed at very different markets using premium prices for one product and competitive pricing for the other this clash of images may not work Perhaps JVS should consider launching a range of shorts at their current target market and work to its strengths Marks should be allocated according to the markbands on page 3 with further guidance below A balanced response is one that provides at least two arguments for and two arguments against the option of launching the new range of shorts Izzless For one relevant issue that is one sided award up to 3 For more than one relevant issue that is one sided award up to a maximum of 4 Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgment conclusion Candidates cannot reach the 7 8 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer One argument for or against Max award 3 marks Two arguments for or two arguments Max award 4 marks against One argument for and two arguments Max award 5 marks against Or Two arguments for and one argument against Two arguments for and two arguments Max award 6 marks against no conclusion or judgments 10

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16 4 a M18 3 BUSMT SP2 ENG TZ0 XX M Describe one role of a vision statement for HS 2 A vision statement for HS is likely to help the organization set its short term and long term objectives It is likely to act as an important driver for recruitment selection and motivation of its young unskilled workforce made up of school leavers Award 1 for describing one role of a vision statement Award an additional 1 when candidates apply their response to the stimulus N B Do not reward responses suggesting that one of the roles of a vision statement is to promote the business b Explain how the following can benefit HS i job enlargement 2 Job enlargement will increase the range of skills and tasks able to be performed by the school leavers who may lack direct experience of working in a national chain and or batch production As recruits will hopefully become future managers it will be important for effective future leadership in the stores to have experience in all jobs offered by HS Award 1 for identification of an appropriate benefit and an additional 1 for an explanation of the benefit and application to the stimulus Application may not be merely nominal Be sure that the candidate is explaining the benefit to HS ii intrapreneurship 2 Intrapreneurship allows for risk taking creativity and innovation within HS Given the intense competition from the global fast food restaurants the opportunity to develop new healthy snacks will be vital to maintain market share Award 1 for identification of an appropriate benefit and an additional 1 for an explanation of the benefit and application to the stimulus Candidates do not have to define what a vision statement is Rather they should describe a role For 2 candidates must also link that role to goals or aims Application may not be merely nominal Be sure that the candidate is explaining the benefit to HS

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17 c M18 3 BUSMT SP2 ENG TZ0 XX M Explain two possible economies of scale available to global fast food restaurants but not HS Possible economies of scale available to the global fast food restaurants include Marketing economies of scale the global fast food companies are likely through their global reach to experience significant economies of scale in marketing selling across a whole range of markets HS is a national chain and will not be able to spread advertising costs for example across a whole range of markets Unit costs of marketing will be much lower for the global restaurants Bulk buying economies of scale to develop and meet global demand and to fill supply chains global fast food manufacturers are likely to achieve significant economies through the bulk purchase of raw ingredients a number of fast food manufacturers have vertically integrated with suppliers to ensure that logistics are in place Again unit costs of operations are likely to be lower than HS s Financial economies of scale being present in global markets allows global fast food manufacturers to borrow funds for expansion at much lower rates than a national chain It is indicated in the stimulus that HS finances its training and professional development through retained profits Accept any other relevant economy of scale N B Economies of scale may be without the exact name For example bulk buying discounts is rewardable Candidates do not have to say purchasing economies of scale Mark as a 2 2 Award 1 for identification of an appropriate economy of scale and an additional 1 for an explanation and application to the stimulus Application may not be merely nominal Maximum award per economy of scale 2 4

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18 d M18 3 BUSMT SP2 ENG TZ0 XX M Discuss the two options that Tom is considering for HS in response to the intense competition The first option which is to implement flow production is likely to lead to an increase in production and productivity because of the new technology and specialized roles Currently HS uses batch production With improved productivity HS can increase its portion size without raising prices As a result HS may be able to compete more effectively with the global fast food manufacturers However the introduction of flow production may result in a reduction in the opportunities for job enrichment and intrapreneurship If the new production process is going to lead to specific jobs on the production then apart from job enlargement or rotation the current employees may become demotivated through a restriction on personal growth and development opportunities Staff turnover may increase as employees seek more innovative or challenging work It is likely to be expensive to implement flow production both in terms of the financing and inevitable changes in organizational culture at HS The second option may be quicker to organize and much cheaper The online reality TV show will have established HS firmly in the minds of existing and potential customers A social media campaign will amplify the brand value of HS and should increase market share However measuring the success of social media on market share will be difficult even though the target market should be familiar with this method of promotion The biggest factor against this campaign however is that as a competitive tool against the global manufacturers there will still be this perceived difference in portion size A social media campaign will not address this aspect In fact there is a danger that negative response to the campaign make reduce market share even further Both of the responses have some merit but it would appear that the first option is the most appropriate to tackle the issue of competition with the global fast food manufacturers The changes in the production process will take some time to bed in and a few staff may leave to work for other snack food manufacturers who have more dynamic or challenging roles However the social media campaign will not close the perceived gap between the products offered by HS and those offered by their competitors and thus could backfire While the candidates are not expected to recommend an option the question does not ask them to they should come to conclusions and judgments for top marks Candidates may conclude that either option is better or they may conclude that HS should do both given that Option 2 would not be very expensive 10

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20 5 a M18 3 BUSMT SP2 ENG TZ0 XX M Define the term public sector 2 The public sector involves those areas of the economy that are provided by the government and typically include what is deemed government itself local regional state national and the various services provided by government including education health care public transportation police fire brigades and other functions Award 1 for a basic definition that conveys partial knowledge and understanding or if the candidate merely writes the formula for calculating contribution Award 2 for a full clear definition that conveys knowledge and understanding b Explain one advantage and one disadvantage for CSS of introducing an employee share ownership scheme Advantages of introducing an employee share ownership scheme include employees have a greater economic stake in the business and thus may be more motivated CSS has a means to offer additional compensation to employees that does not increase salary bonus expenses employee share ownership plans usually decrease labour turnover and make it easier to recruit people Disadvantages of introducing an employee share ownership scheme include management of CSS Ebru will have to answer to shareholders other than herself once the plan is in place it will have administrative and legal costs if the business is not publicly traded valuation of shares may prove difficult Accept any other relevant advantage or disadvantage Mark as a 2 2 Award 1 for identification of an appropriate advantage disadvantage and an additional 1 for an explanation and application to the stimulus Application may not be merely nominal Maximum award per advantage disadvantage 2 4

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21 c M18 3 BUSMT SP2 ENG TZ0 XX M Explain one advantage and one disadvantage for CSS of implementing a project based organizational structure Change 1 Advantages for CSS of implementing a project based organizational structure include improved communication between people with different areas of expertise sense of teamwork which can increase motivation Disadvantages for CSS of implementing a project based organizational structure include blurred lines of authority which may create confusing circumstances for employees often project based structures are more expensive than traditional structures as there may be dual levels of management one on the team and one over groups of teams potential for internal conflict within a team Accept any other relevant advantage or disadvantage Mark as 2 2 Award 1 for identification of an appropriate advantage disadvantage and an additional 1 for an explanation and application to the stimulus Application may not be merely nominal Maximum award per advantage disadvantage 2 4

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22 d M18 3 BUSMT SP2 ENG TZ0 XX M With reference to Adams s equity theory and Daniel Pink s motivation theory discuss Ebru s decision to eliminate performance related pay PRP Change 2 and to allow employees to spend 20 of their time on any project they wish Change 3 Adams s equity theory asserts that employee motivation emerges out of employees perceived sense of fairness both between the employee and the firm and among the employees With respect to the firm employees must believe that an equitable relationship exists between their inputs hours work effort etc and outputs compensation benefits etc With respect to other employees an employee must believe that fairness exists that there is an equitable relationship between the inputs of other employees and their outputs Daniel Pink s theory of motivation rests on the notion of autonomy mastery and purpose Money is not the chief motivator of professional level employees but rather their desire for autonomy or near autonomy in the workplace their ability to master their profession or skill set and their sense of doing something with purpose beyond themselves The elimination of PRP could affect some employees sense of equity If before the elimination employees had considered that an equitable relationship existed between inputs and outputs they now might think that the relationship is no longer equitable especially if they continued to work on CSS assigned projects during their 20 dream project time Though elimination of PRP would save CSS money it may negatively affect the motivation of some employees On the other hand Daniel Pink s theory helps to explain why some employees like the changes especially the introduction of the 20 dream project time To these employees money was not the most important consideration but having the freedom and flexibility to pursue their own ideas They would have at least during the 20 time autonomy The time would allow them to strengthen their skill set in areas where they were weak or to work on issues that played to the skills they had already mastered And by working on a dream project they had a greater sense of purpose Giving employees 20 of their time to work on whatever they wanted has the potential to be costly in terms of CSS s core activities The question is whether it will sufficiently improve employee motivation to make up for the time lost or if it will lead to some valuable new products and services Accept any other relevant evaluation Marks should be allocated according to the markbands on page 5 with further guidance below For one of the two motivation theories that is one sided award up to 3 For more than one relevant motivation theories that is one sided award up to a maximum of 4 If a candidate evaluates addresses only one motivation theory award a maximum of 5 Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgment conclusion Candidates cannot reach the 7 8 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer Section C 10

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23 M18 3 BUSMT SP2 ENG TZ0 XX M Questions 6 8 Please mark the candidate response using the assessment criteria on pages 6 7 6 7 8 With reference to an organization of your choice examine the impact of globalization on human resources strategy 20 With reference to an organization of your choice examine the impact of ethics on organizational change 20 With reference to an organization of your choice examine the impact of innovation and culture on an organization 20 N B When the question asks for the application of one concept on another it is still expected that Business Management content will be aligned with the concepts especially the second concept the one being acted on Please note that candidates can conclude that there was a minimal impact however it has to be based on balanced arguments and evaluation Additional guidance in relation to the assessment criteria For each criterion the aim is to find the descriptor that conveys most accurately the level attained by the candidate using the best fit model It is not necessary for every single aspect of a level descriptor to be met for that mark to be awarded The highest level descriptors do not imply faultless performance and should be achievable by a candidate A candidate who attains a high level of achievement for one criterion will not necessarily reach high levels of achievement for the other criteria and vice versa If only one concept is addressed Criteria A B C and E award up to a maximum 3 Criterion D full marks can be awarded Where the question asks for impacts of two concepts on content examiners must allow for unbalanced treatment of the two concepts throughout a candidate s response One concept may be more significant than the other Criterion B For 1 connection is inappropriate ignore superficial For 2 connection is not developed should be treated the same as superficial Criterion C 1 1 arguments are expected per concepts Questions 6 and 7 require consideration of the impact of one concept on a second concept therefore accept 2 2 arguments for a balanced response Justification is through logic or data For 2 there is no balance as there are no counter arguments at all or the arguments are all one sided then this would be unjustified For 3 there are some balanced arguments some of which are justified

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24 M18 3 BUSMT SP2 ENG TZ0 XX M Criterion D Introductions need to be concise and related to the question The candidate s response does not to have explicit headings for each structural element A body is the area in which the substance of arguments occurs It is usually located between the introduction and the conclusion Fit for purpose paragraph means that ideas are presented in a clear academic way For example one idea per paragraph Criterion E One example of an individual could be an individual consumer or an individual manager However this cannot be considered with a group of consumers or a management team For 4 a balanced response look at the perspectives of both individual and group s The chosen individual group needs to be applicable and relevant to the question with specific explanation Candidates need to go beyond stating the stakeholder Candidates need not explicitly say stakeholder If a candidate chooses an organization from another part of the exam for example an organization in the stimulus of section B their response should be marked as follows Criterion A Award a maximum of 1 as the candidate might understand the essence of the two concepts but the content selected is irrelevant as the organisation is fictitious but the candidate may display some understanding of the concepts Criterion B Award 0 as there is no connection to a real organization Criterion C Award a maximum of 1 The arguments cannot be relevant and justified as the organisation is fictitious Criterion D Mark as normal Criterion E Award 0 The individual and or group perspective s cannot be relevant if the organisation is fictitious Specific comments Q6 Accept application to human resource strategy Do not accept operations strategy Q7 Accept any relevant organizational change including amajor change in product strategy For example diversifciation Do not accept the simple adaptation of products to different cultures etc as organizational change Accept a relevant example that may demonstrate that ethics had minimal or no impact therefore organizationl change has not occurred Q8 Candidates can choose any aspect of the chosen organization They should introduce the chosen aspects Candidates can choose organizational or national cultures or both

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2 N18 3 BUSMT BP1 ENG TZ0 XX CS As Fair As AFA 5 10 15 20 25 30 Sam Temperton attended a large international school in the capital of a developing country The school had students from many different nationalities and cultures At the age of sixteen Sam demonstrated several qualities of an entrepreneur such as determination resilience and creativity by setting up his own business at school He bought chocolate bars at a supermarket and then added a small mark up Sam sold chocolate bars to his schoolmates when he saw the long queues at the school shop Sam only ever traded in cash The cost plus mark up pricing strategy was very popular with Sam s target market He sold chocolate bars to classmates well below the high prices charged by the school shop Students were not allowed to engage in trade for profit on the school premises In response Sam started selling chocolate bars to students just off the school premises After completing his International Baccalaureate diploma in 2015 Sam decided to turn his business into something more substantial At school he had studied motivation theory and he liked Daniel Pink s ideas He wanted to become a successful entrepreneur working on his own and to make a difference to the lives of stakeholders In his business management classes the fair trade movement inspired Sam From secondary market research conducted by a non governmental organization NGO Sam had learned to his surprise that the only places to buy fair trade products were supermarkets He had the idea of creating a shop fully dedicated to fair trade products Sam wanted to practice corporate social responsibility CSR in his business operations which he hoped would eventually operate at a global level Sam hoped to set up a retail store selling fair trade chocolate but he had insufficient funds He created a marketing plan for a local bank manager who was offering young entrepreneurs the chance to seek business finance and advice The manager was impressed with Sam s enthusiasm but was concerned about some elements of the plan and Sam s poor understanding of accounting and finance The bank manager thought that Sam did not know the difference between cash flow and profit and that selling only chocolate would not be enough to sustain the business Undeterred Sam came across the idea of pop up stalls1 to sell fair trade chocolate A growing trend pop up businesses are flexible and agile and can be established quickly With his new idea and an improved marketing and business plan Sam was able to raise enough finance to open his first pop up stall However in his hastily prepared application for a pop up business licence Sam forgot to include some important accounting and finance information His business goals were not seen as ethical and his application was declined Realizing his mistake Sam hired an old school friend Kim to prepare a second application and help with the businesses accounts and finances Soon his business named As Fair As AFA was registered 35 Sam set up a pop up stall near a local train station a crowded location with limited space Here the logistics would be difficult but there would be high foot traffic2 especially commuters and young travellers Other pop up businesses had been located in a less busy part of the station However Sam s location decision worked well AFA s sales revenue and profits grew quickly 40 Encouraged by the success of AFA s first pop up stall Sam decided to expand the range of fair trade products and open three additional pop up stalls each run by a new manager To do this he needed to find new suppliers of fair trade products which were proving to be very popular with his customers These fair trade products included coffee clothing and stationery many of which could be sourced locally

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3 45 50 N18 3 BUSMT BP1 ENG TZ0 XX CS At first some suppliers of these fair trade products were not willing to supply Sam as his order and re order quantities were very small However as AFA grew and the suppliers understood Sam s purpose they became more willing to supply AFA Sam worked with two types of suppliers wholesalers that imported products from many parts of the globe local producers that met fair trade standards Sam decided to build on the success of his pop up business by creating an e commerce business to consumer B2C website on which to offer his fair trade products 55 By 2017 AFA was a great success Sales revenue had grown significantly and Sam had opened four traditional brick and mortar retail outlets selling a much larger range of fair trade products Instead of using the stalls at semi permanent locations such as the train station he now used them at temporary venues such as festivals and concerts Sam made most of the growth decisions himself with limited consultation with Kim One of the decisions that later caused problems was his promotion of the four pop up stall managers to managers of the new retail outlets and the recruitment of school leavers to replace the managers at the pop up stalls 60 Faced with growing complexity Sam decided that some form of restructuring of AFA was required He invited a close friend Finn to become his second business partner With Kim promoted to chief financial officer Finn was recruited to become chief operations officer Finn s responsibilities included supervising the four managers of the new retail outlets and being in charge of the e commerce website Sam retained overall control of AFA 65 Signs soon began to appear indicating that business growth was outstripping Sam and Finn s ability to manage Despite lower transport costs and greater bulk buying some diseconomies of scale were affecting AFA s operations Gross and net profit margins were being eroded so Finn increased prices Sam accepted this decision but reminded Finn that AFA s vision was to create opportunities for both internal and external stakeholders Finn responded by telling Sam that if costs were not kept under control then AFA would have to adopt some new pricing strategies By following the fair trade movement AFA was creating opportunities but Sam was concerned that new pricing strategies could undermine AFA s position in the retail market 70 75 80 85 Sam generally did not participate in the day to day running of AFA He focused on developing strategic plans ensuring AFA remained true to its mission and strengthening relationships with stakeholders Finn was methodical and risk averse He focused on financial details logistics tactics and day to day operations Sam was generally pleased that Finn ran the administration of AFA Sam got bored easily and was always restless constantly looking for new ways to grow the business Finn enjoyed the challenges of managing systems He had previously worked in an industry that was highly bureaucratic and centralized with narrow spans of control and top down communication As growth of the four stores and the e commerce website continued Finn argued that a further restructuring was inevitable but Sam was concerned about Finn s leadership style Sam had heard rumours that the managers of the four stores were complaining to each other that they had little input in decision making Rarely visiting any of the stores Sam effectively left Finn to manage AFA on his own Sam was spending an increasing amount of time visiting countries to source new suppliers of fair trade goods and speaking to NGOs and charities about ways that AFA could help them Turn over

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4 90 95 100 105 110 1 2 N18 3 BUSMT BP1 ENG TZ0 XX CS The combination of increasing costs and management unhappiness led to Finn calling an urgent meeting with Sam to discuss organizational issues At the meeting Finn argued that AFA worked well as a concept but that changes were needed He felt that the current management system was unable to cope with the growth of the business Sam wondered whether he should convert AFA to a cooperative with managers acting as associates rather than being paid a salary Sam felt this conversion would align AFA with the ideas of Daniel Pink He asserted that Pink s theory should be extended to the managers of the four stores and to Kim Finn did not like this idea and felt that he was not being listened to He feared that the mission and corporate social responsibility aspects of AFA would be lost He saw these as essential aspects of the positioning perception of the business Thinking that Sam was still not listening to his concerns Finn brought up his latest management idea to highlight the problems at AFA Finn revealed that unknown to Sam he had hired a mystery secret shopper to visit two of the stores She had visited stores at their busiest times Finn was appalled at what she had reported including poorly organized stores unhelpful staff a failure to regularly mention the importance of fair trade at the checkout Finn was left wondering whether these two stores were devaluing the vision and mission of AFA as a fair trade store Though Sam was disappointed with what the mystery shopper reported he was angry at Finn s deception Finn countered that his decision to use a mystery shopper revealed the true nature of some of AFA s problems The meeting broke up without any final decision being reached It was their first significant disagreement about the current situation and strategic direction of AFA pop up stalls short term temporary retail venues foot traffic the presence and movement of people walking around in a particular space Companies products or individuals named in this case study are fictitious and any similarities with actual entities are purely coincidental

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4 N18 3 BUSMT HP1 ENG TZ0 XX Section B Answer the following question 4 Sam and Finn are having difficulties resolving their disagreements Finn was convinced that the problems at AFA should be resolved by a change in the organizational structure Sam however was convinced that he should strengthen the organizational culture Sam reluctantly accepted the need for greater delegation but insisted that there should be more training for all employees on the culture and ethics of AFA As part of greater delegation Kim was given responsibility for the relationship between AFA and its suppliers Kim is concerned that she spends a lot of time chasing orders that do not arrive and dealing with the poor quality of orders Some products have to be thrown away because they have passed their sell by dates Others have to be returned to suppliers because the outlet managers do not accept the poor quality and therefore cannot be sold AFA s stock of fair trade woollen hats has now reached 500 with an annual sales average of around 1250 for the whole business Kim wants to introduce lean production including total quality management TQM throughout AFA s operations and has created a Gantt chart to show the stages in implementation sell by dates dates printed on the packaging of products that state the date after which the product can no longer be sold This question continues on the following page

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5 N18 3 BUSMT HP1 ENG TZ0 XX Question 4 continued Figure 1 Gantt chart for the implementation of lean production including TQM at AFA Week 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Research and benchmark other businesses Recruit consultants Appoint manager Design systems Train managers Train staff Install IT systems Introduce stock control system Introduce total quality management Complete lean production process a State two elements of an organizational culture b 2 i Calculate the inventory stock turnover for woollen hats show all your working 2 ii Comment on your result in b i 2 c Explain the usefulness of a Gantt chart to AFA in planning the implementation of a new process 4 d Discuss the value to AFA of lean production methods 10 Turn over

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6 N18 3 BUSMT HP1 ENG TZ0 XX Section C Answer the following question 5 Sam is still impatient and keen to grow the business He is becoming increasingly frustrated by problems with suppliers particularly AB Clothing ABC Frequently orders are late and wrong and quality is becoming a major problem Sam has heard rumours of disagreements amongst ABC s board members and discontent from major shareholders ABC s share price has fallen 25 in the last month Productivity has fallen and strikes have been threatened Recently several press reports linked ABC to using child labour and suggested that the company did not always use organic materials for its products Sam is wondering whether to take over ABC He is sure that many of the problems at ABC could be resolved and that ABC would become once again a reliable supplier Sam has put together some information Figure 2 relates to AFA and shows a summary of issues and additional information Tables 1 and 2 provide data on ABC Figure 2 Fishbone diagram of the current situation at AFA Growth Opportunities limited at the moment Sam still has ambitions Difficult to control Management Has grown Disagreements Limited training of managers Different focus of individual managers Unreliability Confusion Quality issues have arisen Lack of management control Quality Organization Suppliers This question continues on the following page Unchanged structure Unresponsive Lack of training for employees Not been a top priority Poor control of employees Possibility of lean production Still making significant profilts Efficiency

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3 N18 3 BUSMT HP1 ENG TZ0 XX M The markbands and assessment criteria on pages 3 6 should be used where indicated in the markscheme Section A Q1 b Q2 b Level descriptor Q3 b Marks 0 1 2 The work does not reach a standard described by the descriptors below Little knowledge and understanding of relevant issues and 3 4 A description or partial analysis of some relevant issues 5 6 business management tools where applicable techniques and theories Little use of business management terminology Little reference to the stimulus material with some use of business management tools where applicable techniques and theories Some use of appropriate terminology Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization At the lower end of the markband responses are mainly theoretical An analysis of the relevant issues with good use of business management tools where applicable techniques and theories Use of appropriate terminology throughout the response Effective use of the stimulus material

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4 Section B Q4 d N18 3 BUSMT HP1 ENG TZ0 XX M Level descriptor Marks 0 1 2 The work does not reach a standard described by the descriptors below 3 4 Little understanding of the demands of the question Few business management tools where applicable techniques and theory are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization 5 6 Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated 7 8 Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated 9 10 Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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5 N18 3 BUSMT HP1 ENG TZ0 XX M Section C question 5 Criterion A Knowledge and understanding of tools techniques and theories This criterion addresses the extent to which the candidate demonstrates knowledge and understanding of relevant business management tools techniques and theories as stated and or implied by the question This includes using appropriate business management terminology Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Superficial knowledge of relevant tools techniques and theory is demonstrated Satisfactory knowledge and understanding of relevant tools techniques and theories is demonstrated Good knowledge and understanding of relevant tools techniques and theories is generally demonstrated though the explanation may lack some depth or breadth Good knowledge and understanding of relevant tools techniques and theories is demonstrated Criterion B Application This criterion addresses the extent to which the candidate is able to apply the relevant business management tools techniques and theories to the case study organization Marks Level descriptor The work does not reach a standard described by the descriptors below 0 The relevant business management tools techniques and theories are connected 1 to the case study organization but this connection is inappropriate or superficial The relevant business management tools techniques and theories are 2 appropriately connected to the case study organization but this connection is not developed The relevant business management tools techniques and theories are generally 3 well applied to explain the situation and issues of the case study organization though the explanation may lack some depth or breadth Examples are provided The relevant business management tools techniques and theories are well applied 4 to explain the situation and issues of the case study organization Examples are appropriate and illustrative Criterion C Reasoned arguments This criterion assesses the extent to which the candidate makes reasoned arguments This includes making relevant and balanced arguments by for example exploring different practices weighing up their strengths and weaknesses comparing and contrasting them or considering their implications depending on the requirements of the question It also includes justifying the arguments by presenting evidence for the claims made Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Statements are made but these are superficial Relevant arguments are made but these are mostly unjustified Relevant arguments are made and these are mostly justified Relevant balanced arguments are made and these are well justified

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6 N18 3 BUSMT HP1 ENG TZ0 XX M Criterion D Structure This criterion assesses the extent to which the candidate organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction a body a conclusion fit for purpose paragraphs Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Two or fewer of the structural elements are present and few ideas are clearly organized Three of the structural elements are present or most ideas are clearly organized Three or four of the structural elements are present and most ideas are clearly organized All of the structural elements are present and ideas are clearly organized Criterion E Individual and societies This criterion assesses the extent to which the candidate is able to give balanced consideration to the perspectives of a range of relevant stakeholders including individuals and groups internal and external to the organization Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below One individual or group perspective is considered superficially or inappropriately One relevant individual or group perspective is considered appropriately or two relevant individual or group perspectives are considered superficially or inappropriately At least two relevant individual or group perspectives are considered appropriately Balanced consideration is given to relevant individual and group perspectives

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7 N18 3 BUSMT HP1 ENG TZ0 XX M Section A 1 a Describe two elements of a marketing plan line 21 for AFA 4 The main elements of a marketing plan are details of the marketing objectives of the business including target market sales forecasts marketing budget including financial projections marketing strategies which may include 4Ps at SL 7Ps at HL detailed action plan Context Sam has poor understanding of finance so the budget may not have been done well He may have had problems with forecasts as this is a new business One objective was to only sell coffee Sam had CSR as one of the objectives which presumably applied to marketing The two elements can both come from the 4Ps provided they are clearly distinguished Do not allow elements from a business plan eg vision statement unless they are clearly linked to marketing Mark as 2 2 Award 1 for each correct element identified and 1 for a description of how that feature relates to AFA Award a maximum of 2 per element b With reference to AFA explain why applying appropriate principles and ethics of accounting practice is important Accounting principles and ethics include integrity being straightforward honest and truthful objectivity avoiding bias conflict of interest professionalism accounts produced to relevant professional standards confidentiality accounts need to comply with legal obligations and be compliant with standards set by professional bodies Context in the context of AFA the business is run on ethical and fair trade concepts Failing in any of the accounting principles and ethics could damage the reputation of the business and AFA could lose sales and customers Investors will also need reassurance in relation to the ethics of the business Other stakeholders such as pressure groups concerned with fair trade may need to be satisfied Discussion of ethics in a wider sense is allowed but 6 can only be achieved if there is some reference to accounting principles If ethics are general and no mention of accounting principles ethics then maximum award is 3 If accounting principles only with no reference to ethics accounting ethics then maximum award is 3 6

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9 2 a N18 3 BUSMT HP1 ENG TZ0 XX M Describe two external stakeholders of AFA other than customers 4 External stakeholders include customers not allowable for this question suppliers originally nervous about supplying Sam s new business Need to conform to fair trade principles Could include mystery shopper if it is clear that this is not an employee government for taxes data etc Includes a Companies House role for proper accounts Could include trading standards for ethics Could include licensing issues No evidence as to whether government wants to encourage fair trade or not banks and other creditors at times AFA needs finance for expansion special interest groups pressure groups eg charities NGOs pressure groups there is a fair trade movement no need to use terms like special interest groups the community little evidence in case so not a good one to choose to get context mark competitors supermarkets also stock fair trade products possible external sources of finance N B Shareholders are NOT external Mark as 2 2 Award 1 for each correct element identified and 1 for a description of how that feature relates to AFA Award a maximum of 2 per element b With reference to AFA explain the importance of branding The importance of branding to AFA can be classified in a number of areas competition branding can be used to differentiate eg from supermarkets USP AFA seeks to be the only dedicated fair trade store Branding can enhance this USP pricing A well developed brand can help AFA set premium prices helping profits which need improving The importance can be developed through the need to attract customers eg to the new stores the need to encourage repeat purchases eg through brand loyalty Accept any other relevant explanation Marks should be allocated according to the markbands on page 3 Award a maximum of 3 for a theoretical answer often a pre prepared textbook answer Award a maximum of 5 if the explanation is mainly descriptive but in context 6

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10 3 a N18 3 BUSMT HP1 ENG TZ0 XX M With reference to AFA outline one benefit and one cost to Sam of opening a new e commerce website lines 51 52 4 Main context Sam s vision to operate at a global level Management issues Need to reduce costs Benefits include targeting new customers locally nationally and even globally which is Sam s vision sales volumes will increase revenue will grow and assuming costs are kept under control AFA s profits will increase economies of scale eg with suppliers possible reduced operating costs eg fewer sales assistants lower rents without retails outlets Costs include designing the website managing the website maintenance costs managing orders paying packers etc dealing with increased sales eg recruiting people paying additional wages more warehousing etc other setup costs eg for online payment systems diseconomies of scale Sam and Finn are not managing well opportunity cost if developed N B Costs do not include general disadvantages Mark as 2 benefits 2 costs Award 1 for each correct cost or benefit identified and 1 for a description of how that cost or benefit relates to AFA Award a maximum of 2 per cost or benefit There can be no more than one of each cost or benefit b Distinguish between the leadership styles of Sam and Finn N B Culture is not on the SL guide Sam Sam clearly wishes to remain in charge of AFA as a paternalistic or soft autocratic leader Allow laissez faire and other leadership styles if explained effectively There is evidence from the stimulus that Sam prefers to be a big picture thinker He is mostly involved in the setting of the mission and vision of AFA He does not enjoy the day to day running of the business and has left this to Finn However there is also evidence that Sam given his positive thoughts towards Daniel Pink s theory is a soft autocrat given that he is willing to delegate and empower some of the managers to run their own individual retail stores Some candidates might mention that using Handy s classification from the Gods of Management Sam is clearly a Zeus figure there is no need to mention these 6

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11 N18 3 BUSMT HP1 ENG TZ0 XX M Finn Finn clearly aligns his leadership to a more structured or bureaucratic style He seemingly enjoys monitoring the details which Sam finds boring Finn enjoys centralization and control which is tied to the way in which he communicates Finn clearly believes in formal organization and his leadership style typifies this His decision to employ a mystery shopper to effectively spy on his managers indicates that he is slightly paranoid and wishes to know about everything occurring in the business Some candidates might mention that using Handy s classification form the Gods of Management Finn is typically showing the leadership style inherent in an Apollo figure There is no need to mention these Candidate can be rewarded if they argue that the styles are both the same usually autocratic provided they support their argument Accept any other relevant explanation Marks should be allocated according to the markbands on page 3 Award a maximum of 3 for a theoretical answer Award a maximum of 3 if only Sam or Finn Award a maximum of 5 if the explanation is mainly descriptive but in context Eg if both are explained but not distinguished

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12 N18 3 BUSMT HP1 ENG TZ0 XX M Section B 4 a State two elements of an organizational culture 2 References could be made to style of management leadership vision mission statements goals nature of the workforce simple reference to employees is not enough nature of the business norms values beliefs morals including tradition organizational structure Where these are shown above as either or this can only be rewarded as one element eg if both leadership and management are stated this is only one element References could be made to power culture role culture task culture and person culture Elements should relate to internal factors and not external factors such as the culture of the country Award 1 for each element to a maximum of 2 This answer does not need to be in context b i Calculate the inventory stock turnover for woolen hats Stocks 500 annual sales 1250 so turnover Allow 2 1250 2 5 times a year 500 500 365 146 days 1250 Award 2 for a correct answer which must include 2 5 times or 2 5 times per year or 146 days Award 1 for an attempt eg calculating days sales in stocks as 146 days or making a mistake or no units If the 2 mark answer does not appear in i but does appear in ii then i can be rewarded retrospectively you will have to go back to mark entry for i Do not reward 500 1250 or ii 500 1250 Comment on your result in b i Seems very low is the product seasonal Is there poor management of stock control Use OFR Award 1 for a simple statement and 2 if the statement is in context Do not reward simply putting the answer into words 2

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13 c N18 3 BUSMT HP1 ENG TZ0 XX M Explain the usefulness of a Gantt chart to AFA in planning the implementation of a new process 4 Usefulness includes clarity in planning determining the likely project time of 20 weeks context identifying tasks that can be done concurrently eg researching other businesses and appointing consultants context exploring the consequences of delays eg delays in training managers context help scheduling eg training context help monitoring progress Context could also be lean production Usefulness could also be considered using shortcomings of Gantt An explanation will usually include at least two uses features of a Gantt chart Award 4 for a good explanation using context effectively Award 3 for either an explanation but weak context or a weak explanation but effective context Award 2 for an explanation but no context Award 1 for some understanding d Discuss the value to AFA of lean production methods Contextual issues poor stock control poor order management poor quality control Aspects of lean production lean production examines processes to find and eliminate all forms of waste production processes adjusted to eliminate waste such as JIT increased efficiency eg with suppliers managing employees more effectively increasing capacity utilisation Might include Kaizen total quality management TQM cell production flexible specialisms simultaneous engineering JIT and process innovation such as greater use of IT Most likely are JIT total quality management TQM process innovation Kaizen However some techniques are not appropriate for AFA there are costs involved eg IT costs of changing Can AFA afford these are low levels of stocks suitable for retailers such as AFA 10

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15 N18 3 BUSMT HP1 ENG TZ0 XX M Section C 5 Using the case study additional information on pages 4 to 7 and appropriate business tools recommend whether AFA should take over ABC Arguments for Might solve supply problems such as lateness of deliveries and wrong orders Better control of quality is possible particularly as lean production is an option Easier to manage the supply chain Could be a good time to buy ABC s share price is low down 25 shareholders are dissatisfied and at the current share price the business seems cheap Sam is impatient to grow the business vertical integration would help Market growth is very strong forecast 10 in 2019 More marketing by ABC may solve ABC s problems ABC has potential to exploit this growth by maintaining its market share market share forecast to fall in 2019 An increase in ABC s marketing budget may produce good results Sam is ambitious Arguments against Potential for bad publicity about ABC to damage AFA Not using organic materials would destroy Sam s business model Productivity is falling strikes are threatened Can Sam solve these problems Maybe solve other problems first eg disagreements poor management unresponsiveness lack of training quality issues Falling sales at ABC may be due to poor products sales forecast down from 6 5m to 5 9m Doing nothing is always a useful option ABC has liquidity problems The current ratio decreases from 1 0 to 0 6 Business is highly geared should Sam take this on Is it a risk Gearing up from 400 to 500 high and rising High and rising gearing is a worry Falling sales and profits at ABC are a real worry Falling return on equity for ABC equity constant huge drop in profits from 1m to 0 25m Growing number of competitors competitors forecast up from 5 to 20 in 2019 Increasing worries of growing current liabilities up from 2m to 5m in 2019 Falling share price Why Managerial conflict at AFA could they take on more problems The decision is likely to hang on the extent to which Sam AFA can solve ABC s problems Accept any other relevant discussion Marks should be awarded according to the mark bands on page 5 20

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16 N18 3 BUSMT HP1 ENG TZ0 XX M Criterion A possible theories management tools and techniques include Accounting techniques and ratios interpreting data mergers takeovers Fishbone Boston Matrix Ansoff marketing issues HRM management issues SWOT Force Field Decision trees if used with a sense of purpose the importance of assumptions For 4 Tools techniques and theory understood and developed well with some relevance to the additional stimulus material For 2 some understanding of at least two tools techniques or theories but not developed Criterion B the tools techniques theories and stimulus applied to the decision Application will be judged by the use of the stimulus material For 4 relevant tools techniques and theories are applied well to the case study context and additional stimulus material the application is convincing and relevant Remember understanding has been rewarded in Criterion A For 2 some limited context application but not developed Use of tools limits candidate s ability to make reasoned arguments Criterion C Takeover discussed in balanced way conclusions drawn and recommendation made supported For 4 There needs to be a clear recommendation supported by the data For 2 Some limited arguments but not justified Or limited analysis e g one sided argument but candidate arrives draws a reasoned conclusion Criterion D Structure This criterion assesses the extent to which the student organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction a concluding paragraph Please note this can be different from the concept of a conclusion recommendation in Criterion C D can be rewarded without a recommendation fit for purpose paragraphs This means not too long each focused on distinct issues structure This means how the reader is guided through the discussion how the paragraphs are sequenced For 4 all four elements present clearly organized For 2 No logical structure but other elements present or logical structure with other elements missing Criterion E Stakeholders individuals Sam most likely Finn Kim individual consumers groups Managers employees both at either business customers communities governments For 4 Individual s and group s are considered in a balanced way ie needs 1 or more of both individuals and groups For 2 one individual or group considered appropriately or several individuals or groups considered superficially

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3 N18 3 BUSMT SP1 ENG TZ0 XX Section B Answer the following question 4 AFA was at a critical point Sam and Finn had not fully resolved their disagreements They seemed to be constantly arguing but Sam could also see that new issues were emerging At their most recent meeting in early 2018 Finn provided the following financial information to illustrate the declining trend in gross profit margin Table 1 Selected financial information for AFA Year Gross profit Sales revenue 2016 142 888 2 164 486 2017 124 211 2 400 625 In addition the recruitment of new staff was becoming a problem as the wages that AFA offered were much lower than fair trade competitors In a meeting between Sam and Finn they argued over the best way to financially reward and motivate newly recruited workers given the lower wages paid by AFA Finn argued for a reward system based on fringe payments perks as this was being offered by AFA s main competitors the supermarkets Sam countered that AFA should form a cooperative involving all physical stores He argued that creating a worker cooperative could give all members a sense of community and fulfillment and motivate them so that all members of the cooperative would benefit There would also be additional stakeholder benefits Finn argued that a worker cooperative was too difficult to organize and operate and would not solve the problem of recruiting staff In the meantime AFA was continuing to attract a good deal of publicity Sam had appeared on a national television show about young innovative entrepreneurs After the television show ended one very large international retailer with a strong online presence contacted Sam about the possibility of a takeover Sam initially refused but as the details of the takeover became clear he started to seriously consider the opportunity By selling the business Sam would have enough fresh capital to start new innovative businesses and make some of his other visions and ideas into reality In addition to the corporate social responsibility CSR AFA was generating the takeover would give AFA access to other intangible assets However the international retailer had indicated that it could not guarantee keeping all existing and newly recruited employees and managers Finn and Kim were both very worried that Sam would even contemplate the takeover which they felt was an act of betrayal to all the stakeholders of AFA a Define the term intangible asset b i Calculate the gross profit margin of AFA for 2016 and 2017 ii Explain one possible reason for the trend in gross profit margin for AFA between 2016 and 2017 c Explain one benefit and one cost to AFA of using fringe payments perks to financially reward staff d Discuss whether Sam should accept the offer of a takeover 2 2 2 4 10

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3 N18 3 BUSMT SP1 ENG TZ0 XX M The markbands and assessment criteria on pages 3 4 should be used where indicated in the markscheme Section A Q1 b Q2 b Level descriptor Q3 b Marks 0 1 2 The work does not reach a standard described by the descriptors below Little knowledge and understanding of relevant issues and 3 4 A description or partial analysis of some relevant issues 5 6 business management tools where applicable techniques and theories Little use of business management terminology Little reference to the stimulus material with some use of business management tools where applicable techniques and theories Some use of appropriate terminology Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization At the lower end of the markband responses are mainly theoretical An analysis of the relevant issues with good use of business management tools where applicable techniques and theories Use of appropriate terminology throughout the response Effective use of the stimulus material

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4 Section B Q4 d N18 3 BUSMT SP1 ENG TZ0 XX M Level descriptor Marks 0 1 2 The work does not reach a standard described by the descriptors below 3 4 Little understanding of the demands of the question Few business management tools where applicable techniques and theory are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization 5 6 Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated 7 8 Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated 9 10 Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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5 N18 3 BUSMT SP1 ENG TZ0 XX M Section A 1 a Describe two elements of a marketing plan line 21 for AFA 4 The main elements of a marketing plan are details of the marketing objectives of the business including target market sales forecasts marketing budget including financial projections marketing strategies which may include 4Ps at SL 7Ps at HL detailed action plan Context Sam has poor understanding of finance so the budget may not have been done well He may have had problems with forecasts as this is a new business One objective was to only sell coffee Sam had CSR as one of the objectives which presumably applied to marketing The two elements can both come from the 4Ps provided they are clearly distinguished Do not allow elements from a business plan eg vision statement unless they are clearly linked to marketing Mark as 2 2 Award 1 for each correct element identified and 1 for a description of how that feature relates to AFA Award a maximum of 2 per element b With reference to AFA explain why applying appropriate principles and ethics of accounting practice is important Accounting principles and ethics include integrity being straightforward honest and truthful objectivity avoiding bias conflict of interest professionalism accounts produced to relevant professional standards confidentiality accounts need to comply with legal obligations and be compliant with standards set by professional bodies Context in the context of AFA the business is run on ethical and fair trade concepts Failing in any of the accounting principles and ethics could damage the reputation of the business and AFA could lose sales and customers Investors will also need reassurance in relation to the ethics of the business Other stakeholders such as pressure groups concerned with fair trade may need to be satisfied Discussion of ethics in a wider sense is allowed but 6 can only be achieved if there is some reference to accounting principles If ethics are general and no mention of accounting principles ethics then maximum award is 3 If accounting principles only with no reference to ethics accounting ethics then maximum award is 3 6

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7 2 a N18 3 BUSMT SP1 ENG TZ0 XX M Describe two external stakeholders of AFA other than customers 4 External stakeholders include customers not allowable for this question suppliers originally nervous about supplying Sam s new business Need to conform to fair trade principles Could include mystery shopper if it is clear that this is not an employee government for taxes data etc Includes a Companies House role for proper accounts Could include trading standards for ethics Could include licensing issues No evidence as to whether government wants to encourage fair trade or not banks and other creditors at times AFA needs finance for expansion special interest groups pressure groups eg charities NGOs pressure groups there is a fair trade movement no need to use terms like special interest groups the community little evidence in case so not a good one to choose to get context mark competitors supermarkets also stock fair trade products possible external sources of finance N B Shareholders are NOT external Mark as 2 2 Award 1 for each correct element identified and 1 for a description of how that feature relates to AFA Award a maximum of 2 per element b With reference to AFA explain the importance of branding The importance of branding to AFA can be classified in a number of areas competition branding can be used to differentiate eg from supermarkets USP AFA seeks to be the only dedicated fair trade store Branding can enhance this USP pricing A well developed brand can help AFA set premium prices helping profits which need improving The importance can be developed through the need to attract customers eg to the new stores the need to encourage repeat purchases eg through brand loyalty Accept any other relevant explanation Marks should be allocated according to the markbands on page 3 Award a maximum of 3 for a theoretical answer often a pre prepared textbook answer Award a maximum of 5 if the explanation is mainly descriptive but in context 6

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8 3 a N18 3 BUSMT SP1 ENG TZ0 XX M With reference to AFA outline one benefit and one cost to Sam of opening a new e commerce website lines 51 52 4 Main context Sam s vision to operate at a global level Management issues Need to reduce costs Benefits include targeting new customers locally nationally and even globally which is Sam s vision sales volumes will increase revenue will grow and assuming costs are kept under control AFA s profits will increase economies of scale eg with suppliers possible reduced operating costs eg fewer sales assistants lower rents without retails outlets Costs include designing the website managing the website maintenance costs managing orders paying packers etc dealing with increased sales eg recruiting people paying additional wages more warehousing etc other setup costs eg for online payment systems diseconomies of scale Sam and Finn are not managing well opportunity cost if developed N B Costs do not include general disadvantages Mark as 2 benefits 2 costs Award 1 for each correct cost or benefit identified and 1 for a description of how that cost or benefit relates to AFA Award a maximum of 2 per cost or benefit There can be no more than one of each cost or benefit b Distinguish between the leadership styles of Sam and Finn N B Culture is not on the SL guide Sam Sam clearly wishes to remain in charge of AFA as a paternalistic or soft autocratic leader Allow laissez faire and other leadership styles if explained effectively There is evidence from the stimulus that Sam prefers to be a big picture thinker He is mostly involved in the setting of the mission and vision of AFA He does not enjoy the day to day running of the business and has left this to Finn However there is also evidence that Sam given his positive thoughts towards Daniel Pink s theory is a soft autocrat given that he is willing to delegate and empower some of the managers to run their own individual retail stores Some candidates might mention that using Handy s classification from the Gods of Management Sam is clearly a Zeus figure there is no need to mention these 6

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9 N18 3 BUSMT SP1 ENG TZ0 XX M Finn Finn clearly aligns his leadership to a more structured or bureaucratic style He seemingly enjoys monitoring the details which Sam finds boring Finn enjoys centralization and control which is tied to the way in which he communicates Finn clearly believes in formal organization and his leadership style typifies this His decision to employ a mystery shopper to effectively spy on his managers indicates that he is slightly paranoid and wishes to know about everything occurring in the business Some candidates might mention that using Handy s classification form the Gods of Management Finn is typically showing the leadership style inherent in an Apollo figure There is no need to mention these Candidate can be rewarded if they argue that the styles are both the same usually autocratic provided they support their argument Accept any other relevant explanation Marks should be allocated according to the markbands on page 3 Award a maximum of 3 for a theoretical answer Award a maximum of 3 if only Sam or Finn Award a maximum of 5 if the explanation is mainly descriptive but in context Eg if both are explained but not distinguished

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10 N18 3 BUSMT SP1 ENG TZ0 XX M Section B 4 a Define the term intangible asset 2 An intangible asset is an asset that lacks physical substance and usually is very hard to evaluate but it can add value to the business It includes patents copyrights franchises goodwill trademarks and brand names with links to product positioning of a good or service that a business may offer The definition does not need to be worded exactly as above Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition that conveys knowledge and understanding similar to the answer above NOTE Some candidates may write their definition in the context of AFA in such cases the main examples of intangible assets would be brand image due to ethical behaviour and CSR leading to competitive advantage customer loyalty positive word of mouth and goodwill b i Calculate the gross profit margin of AFA for 2016 and 2017 GPM 2016 142 888 100 6 6 2 164 486 1 GPM 2017 124 211 100 5 17 2 400 625 1 2 Award 1 for each correct answer which includes the percentage sign NOTE candidates are not asked to show their working Candidates may round up the results of their calculations for example 5 1 or 5 2 instead of 5 17 ii Explain one possible reason for this trend in gross profit margin for AFA between 2016 and 2017 Given that sales revenues have increased the likely cause of the decrease in gross profit margin is that direct costs have risen faster There is evidence of diseconomies of scale being experienced by AFA and this calculation backs this up Another possible reason is fluctuation increase of foreign currency exchange rates as AFA works with wholesalers that import products from many parts of the globe line 46 Another possible reason is the increase of the cost of goods sold which could be linked to the fact that price of fair trade goods may fluctuate increase Award 1 for a possible reason for the trend in gross profit margin with an additional mark for application to AFA 2

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11 c N18 3 BUSMT SP1 ENG TZ0 XX M Explain one benefit and one cost to AFA of using fringe payments perks as a way to financially reward staff Example of explanation of a benefit For AFA given the low wages it is likely that fringe payments will act as an incentive to existing and new staff Private health care for example would allow Sam and AFA to demonstrate a commitment to the well being of its employees in the same spirit that the fair trade movement does for its suppliers Motivation could improve and address some of the issues raised by the mystery shopper that Finn employed Example of explanation of a cost The cost to AFA is that even with considerable revenue growth fringe payments will increase direct costs which will put further pressure on gross margins Sam and Finn would also need to draw up new contracts of work clearly stating how the new fringe benefits would be calculated and distributed There are additional managers who may be attracted to this rewards scheme and this may create some jealousy if they are not fairly applied One key question is whether the fringe payments will apply to all staff Award 1 for each benefit and cost identified with an additional 1 per cost benefit with direct application to AFA 4

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12 d N18 3 BUSMT SP1 ENG TZ0 XX M Discuss whether Sam should accept the offer of a takeover There is considerable evidence from the stimulus that Sam and Finn s relationship is on the verge of breaking down The mystery shopper incident has fuelled suspicion on both sides and a lack of trust and cooperation is evident It would appear that Sam does not wish to involve himself in the day to day running of the business and instead focus on big picture thinking This offer from the international retailer coming at this time would be very tempting Entrepreneurs such as Sam sometimes do sell a business looking for new opportunities as they may have achieved their own personal goals in setting up a new sustainable business The goodwill offered by the purchaser would easily allow Sam to put his entrepreneurial qualities to good use in new markets There is considerable evidence from research that some serial entrepreneurs enjoy setting up new enterprises as an exciting challenge and when the final goal is achieved move on Sam does seem to be restless and bored easily and the current tensions conflicts may force his hand However whilst the positive publicity from the reality television show has lifted Sam it could be easily taken away if the takeover occurs Temperton sells out headlines would not help Sam or AFA and could impact on the brand value of the business There is also the hypocrisy from Sam given that he wanted to help internal and external stakeholders in the best way that he could that the sale of AFA would create Can he afford to tarnish his image Finn and Kip provide the conscientious voice against the sale AFA is doing well and its position in the market is established There is however still much to do Why quit now when the actual goal has not been fully achieved There is conflict at AFA and this is to be expected It would be a great shame for all the hard work carried out if Sam were to accept the offer However Sam and Finn appear to be drifting apart Perhaps a change at the top is needed to bring fresh thinking to AFA at a time of expansion as long as Kim and Finn remain loyal to AFA Mark according to the markbands on page 4 10

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2 N18 3 BUSMT HP2 ENG TZ0 XX Section A Answer one question from this section 1 Designer Dolls DD Designer Dolls DD is a start up business that will create hand crafted unique dolls using a job customized production method As part of their business plan DD undertook a breakeven analysis Table 1 Forecasted figures for DD for the first year of operation Fixed costs 10 000 Variable costs per doll 30 Price per doll 50 Full productive capacity 900 dolls a Describe one limitation of a break even analysis 2 b Calculate i the number of dolls that DD needs to sell to achieve a profit of 4000 show all your working 2 ii the capacity utilization rate at the break even quantity for DD for the first year of operation show all your working 2 iii the profit or loss in the first year if DD sells 400 dolls show all your working 2 c Assuming that the quantity of dolls to be sold in the second year is 550 and costs remain unchanged calculate the price per doll that DD would need to charge to make a 6500 profit 2

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3 2 N18 3 BUSMT HP2 ENG TZ0 XX Papel Papel manufactures and sells paper bags It pays cash for 80 of its raw materials but to remain competitive it must sell on credit to all customers Many debtors are not paying on time and creditors suppliers are increasing The board of directors is concerned about Papel s liquidity position The finance manager has provided information from Papel s accounts Table 1 Selected information from Papel s accounts at 31 October 2018 000s Accumulated retained profit 14 Cash 3 Cost of goods sold 2 Creditors 20 Debtors 12 Expenses 2 Long term liabilities debt 20 Net fixed assets 60 Sales revenue 5 Share capital 26 Stock 5 a Define the term debtors 2 b Using information from Table 1 i construct a fully labelled balance sheet for Papel for the end of October 2018 5 ii calculate the current ratio for Papel for the end of October 2018 1 c Explain one possible strategy other than elimination of credit sales for Papel to improve its liquidity position 2 Turn over

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4 N18 3 BUSMT HP2 ENG TZ0 XX Section B Answer two questions from this section 3 KA KA is a public limited company that designs manufactures and sells air conditioners KA s unionized employees are motivated and efficient despite not being involved in any decision making However they are resistant to change The market and competition for air conditioners are growing rapidly KA operates at full capacity but stock turnover has slowed Primary market research revealed that consumers do not differentiate KA air conditioners from those of its competitors All products are perceived as medium price and medium quality KA s customer service is rated as poor customers demand energy efficient products using ecologically sustainable production methods To exploit opportunities and overcome weaknesses and threats KA s management has decided to redesign its products so that they are energy efficient KA is considering two options Option1 Implement lean production methods which includes investing in ecologically sustainable machines that will increase capacity by 10 Total quality management TQM will also be implemented However the financial manager is worried about KA s ability to meet high initial costs The forecasted payback period is three years and average rate of return ARR is 4 Option 2 Outsource the production to QS a company known for its reliability and high capacity to produce excellent quality air conditioners using cradle to cradle manufacturing principles However QS refuses to sign an exclusive long term contract with KA insisting instead on renegotiating the contract every two years KA will have to close its production facility and will use the cost savings to improve customer service and to reposition and differentiate its air conditioners Employees have heard rumours of both options and fear for their jobs Strike action is being considered a Define the term public limited company 2 b With reference to QS explain two features of cradle to cradle manufacturing 4 c Explain two possible human resource strategies that KA management could use to reduce employees resistance to change 4 d Evaluate the two options that KA is considering 10

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5 4 N18 3 BUSMT HP2 ENG TZ0 XX La Bonita LB La Bonita LB is a beach hotel owned by Felix and Rose Sanchez Its current target market is families seeking beach holidays LB offers high quality service Customers do not pay in advance and pay in full on departure LB is located near a capital city As there are no hotel training schools locally Felix provides on the job training to all new recruits A recent survey by LB to assess brand loyalty found that existing customers remain loyal because they appreciate not having to pay in advance as required at other local hotels employees are polite and helpful and particularly good with children the services provided are perceived as very good value for money However many customers have commented that the hotel needs to upgrade its facilities In winter LB has a very low capacity utilization and monthly cash flows are negative LB gets through these months using bank overdrafts while continuing to pay its suppliers in cash to get generous discounts Felix is concerned that the cash flow situation is unsustainable and could get worse because the hotel facilities need upgrading He proposes that LB raises additional finance and finds ways of reducing cash outflows in the winter proposal 1 Rose believes that the cash flow problem is mainly due to low capacity utilization in the winter months She wants to diversify and attract a new segment for the winter business customers However this would involve significant expenditure including upgrading and adding new facilities to the hotel proposal 2 a Define the term brand loyalty b Explain two advantages for LB of using on the job training 2 4 c Explain the importance to LB of two elements of the extended marketing mix d Discuss whether LB should implement proposal 1 or proposal 2 10 4 Turn over

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6 5 N18 3 BUSMT HP2 ENG TZ0 XX Benno Benno is a soft drinks manufacturer Its mission statement is to produce healthy drinks without damaging the environment Competition in the healthy soft drinks market is fierce Benno uses a competitive pricing strategy However sales of Benno s drinks have fallen significantly over the last five years particularly in the 12 18 age group The business has no accumulated retained profits Benno is committed to innovation and corporate social responsibility CSR Its research and development division has recently invented a new biodegradable drink pack ring that starts to break down within two hours of contact with sea water It dissolves fully in 48 hours Currently 98 of pack rings are made of plastic and when dumped in the sea are responsible for the death of many sea creatures A focus group of loyal customers used regularly by Benno s marketing department is wholeheartedly in favour of the new drink rings However the marketing director has read recent studies that suggest purchases of green products are not increasing despite the positive attitude of many consumers towards sustainability and biodegradable products consumers continue to prioritize price when purchasing soft drinks To manufacture the new drink rings machinery costing 5 million would be needed Drink ring production unit costs would rise from 10 cents to 15 cents and prices of a six pack of Benno soft drinks would have to increase by 5 Benno s net profit margin on a six pack is 10 Benno s director of corporate social responsibility favours the change to the new drink rings but is opposed by both the finance director and marketing directors Source Image provided with permission from E6PR a Define the term innovation 2 b Explain two roles of Benno s mission statement 4 c Explain one advantage and one disadvantage for Benno of using a focus group of loyal customers 4 d Recommend whether Benno should replace its plastic drink rings with the new biodegradable drink rings 10

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3 N18 3 BUSMT HP2 ENG TZ0 XX M The markbands and assessment criteria on pages 3 5 should be used where indicated in the markscheme Marks 0 1 2 Level descriptor The work does not reach a standard described by the descriptors below 3 4 5 6 7 8 9 10 Little understanding of the demands of the question Few business management tools where applicable techniques and theories are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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4 N18 3 BUSMT HP2 ENG TZ0 XX M Assessment criteria for Section C Criterion A Knowledge and conceptual understanding This criterion addresses the extent to which the candidate demonstrates knowledge and understanding of the given concepts and relevant business management content theories techniques or tools depending on the requirements of the question Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Superficial knowledge of the given concepts is demonstrated Business management content is not selected or the content selected is irrelevant Satisfactory understanding of one or both of the given concepts is demonstrated Some business management content selected is relevant The relevant content is satisfactorily explained Good understanding of one or both of the given concepts is demonstrated The business management content selected is relevant though it may not be sufficient The relevant content is generally well explained though the explanation may lack some depth or breadth Good understanding of both of the given concepts is demonstrated The business management content selected is relevant sufficient and well explained Criterion B Application This criterion addresses the extent to which the candidate is able to apply the given concepts and the relevant business management content theories techniques or tools depending on the requirements of the question to his or her chosen real world organization s The realworld organization s must not be the organization featured in the prescribed case study for paper 1 Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below The given concepts and or any relevant business management content are connected to the real world organization s but this connection is inappropriate or superficial The given concepts and or relevant business management content are connected appropriately to the real world organization s but this connection is not developed The given concepts and relevant business management content are generally well applied to explain the situation and issues of the real world organization s though the explanation may lack some depth or breadth Examples are provided The given concepts and relevant business management content are well applied to explain the situation and issues of the real world organization s Examples are appropriate and illustrative

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5 N18 3 BUSMT HP2 ENG TZ0 XX M Criterion C Reasoned arguments This criterion assesses the extent to which the candidate makes reasoned arguments This includes making relevant and balanced arguments by for example exploring different practices weighing up their strengths and weaknesses comparing and contrasting them or considering their implications depending on the requirements of the question It also includes justifying the arguments by presenting reasonable evidence or other support for the claims made Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Statements are made but these are superficial Relevant arguments are made but these are mostly unjustified Relevant arguments are made and these are mostly justified Relevant balanced arguments are made and these are well justified Criterion D Structure This criterion assesses the extent to which the candidate organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction a body a conclusion fit for purpose paragraphs Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Two or fewer of the structural elements are present and few ideas are clearly organized Three of the structural elements are present or most ideas are clearly organized Three or four of the structural elements are present and most ideas are clearly organized All of the structural elements are present and ideas are clearly organized Criterion E Individuals and societies This criterion assesses the extent to which the candidate is able to give balanced consideration to the perspectives of a range of relevant stakeholders including individuals and groups internal and external to the organization Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below One individual or group perspective is considered superficially or inappropriately One relevant individual or group perspective is considered appropriately or two relevant individual or group perspectives are considered superficially or inappropriately At least two relevant individual or group perspectives are considered appropriately Balanced consideration is given to relevant individual and group perspectives

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6 N18 3 BUSMT HP2 ENG TZ0 XX M Section A 1 a Describe one limitation of a break even analysis 2 Some of the limitations may include The break even model assumes that all units produced are sold therefore total revenue received if not all of the dolls quantity is sold can be lower which will have a negative impact on the break even point The break even model assumes a linear relationship between output and total variable cost whereas in reality the costs per unit can go down due to economies of scale This will have a negative impact on the break even point The break even model assumes that the price stays constant at all levels of output In reality price can be reduced or increased with direct impact on the break even quantity Accept any relevant description There is no need for further explanation of the exact impact on the break even point Application is not expected Award 1 for each relevant identification list of one limitation of the model Award 1 for a description up to a maximum of 2 b Calculate i the number of dolls that DD needs to sell to reach 4000 level of profit show all your working Fixed costs target profit 10 000 4000 14 000 700 dolls Contribution per unit 50 30 20 shows that it s part of given formula OR Profit total revenue total cost 4000 50X 10 000 30X 20X 14 000 The number of dolls needing to be sold to reach a profit of 4000 700 Award 1 for working and 1 for the correct answer Award a maximum of 2 For a correct response that demonstrates understanding and application of the formula even if no specific headings are presented award full marks Working must be shown for full marks Accept a graphical calculation of BE if drawn and stated accurately ie sufficient to extract correct data do not penalize labeling errors 2

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7 ii N18 3 BUSMT HP2 ENG TZ0 XX M the capacity utilization rate at break even quantity for DD for the first year of operation show all your working Break even quantity Fixed costs Contribution per unit 10 000 50 30 20 500 dolls Capacity utilization rate 500 dolls 0 55 100 55 55 900 dolls Accept 55 5 or 55 56 An alternative method would be Total revenue total costs where total revenue price quantity sold total costs total fixed cost total variable costs Capacity utilization 500 100 55 55 900 Accept 55 5 or 55 6 Do not credit for using the formula as it is given Do not fully credit if the figure is not expressed in Award 1 for correct working which includes the calculations of the breakeven point and 1 for the correct answer in Award up to a maximum of 2 If only the correct breakeven is present then award 1 only if working is shown For a correct response that demonstrates understanding and application of the formula even is no specific heading are presented award full marks 2

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8 iii N18 3 BUSMT HP2 ENG TZ0 XX M The profit or loss in the first year if DD sells 400 dolls show all your working 2 Margin of safety times contribution per unit 400 500 100 20 2000 Do not credit for the calculation of the break even point but allow OFR even if correct It is application of the MOS BE formula which gets the mark for workings Accept any other relevant method Total revenue total costs Price quantity total fixed costs total variable costs 400 50 10 000 400 30 20 000 10 000 12 000 20 000 22 000 2000 a loss Award 1 for correct working and 1 for the correct answer Award up to a maximum of 2 For a correct response that demonstrates understanding and application of the formula even if no specific headings are presented award full marks c Assuming that the quantity of dolls to be sold in the second year is 550 and costs remain unchanged calculate the price per doll that DD would need to charge to make a 6500 profit Target profit total revenue total costs 6500 550X 10 000 30 550 6500 550X 10 000 16 500 6500 550X 26 500 6500 26 500 550X 33 000 550X X 60 Price that DD has to charge is 60 Accept any other method provided that working is shown Award 1 for working and 1 for the correct answer Award a maximum of 2 2

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N18 3 BUSMT HP2 ENG TZ0 XX M 9 2 a Define the term debtors 2 A debtor is a customer or a firm that has purchased a good or service from a business and has not yet paid A debtor may be allowed up to one month or more to settle N B no application required Do not credit examples Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition that conveys knowledge and understanding similar to the answer above reference to repayment period is not necessary for full marks b Using information from Table 1 i construct a fully labelled balance sheet for Papel for the end of October 2018 Papel balance sheet as at 31 October 2018 000s 000s Fixed assets Net fixed assets 60 Current assets Cash Debtors Stock Total current assets 3 12 5 20 Current liabilities Creditors 20 Total current liabilities 20 Net current assets working capital 0 Total assets less current liabilities Long term liabilities 60 20 Net assets 40 Financed by Share capital 26 Accumulated retained profit 14 Equity 40 N B if the candidate does not follow the IB prescribed format award a maximum of 3 N B candidates should not be penalized for writing retained profit omitting the word accumulated 5

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10 N18 3 BUSMT HP2 ENG TZ0 XX M Allow OFR 0 The B S does not reach a standard described below 1 2 The B S is not accurately constructed and or the calculations within and between the various components are not presented or largely incorrect However there is limited evidence of a general understanding of the format 3 4 The principal elements of the B S are constructed but may not be entirely accurate The calculations under each heading component part are largely correct Allow up to two mistakes in calculations and or presentation for 3 Allow for either one error in calculation or one error in presentation 4 For an accurately constructed B S with incorrect calculations award up to a maximum of 3 Allow OFR For example if one irrelevant figure that belongs to the P L account is added obviously the rest will not match 5 The B S is accurately constructed in the expected IBO format All the relevant headings of each component parts are used and correctly classified Do not penalise for internal order of classification All and only the relevant figures are presented No extra irrelevant figures that belong to the P L are included The calculations under each part component of the B S are correct and well presented 5 Deduct 1 for one omission including the overall heading provided the B S is accurately balanced N B If the candidate did not follow the IBO format award up to 2 marks ii calculate the current ratio for Papel for the end of October 2018 current assets 20 Current ratio 1 current liabilities 20 Award 1 for the correct answer Award no marks merely for writing the formulae Award 1 mark with OFR but working must be shown 1

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11 c N18 3 BUSMT HP2 ENG TZ0 XX M Explain one possible strategy other than elimination of credit sales for Papel to improve its liquidity position Liquidity is the ability to pay short term debts Papel s liquidity position is delicate Working capital is zero and Papel s acid test is 0 75 which means that Papel has less than 1 of liquid assets with which to repay every 1 of its short term debts Papel could improve its liquidity position by keeping a tight credit control with debtors Many are not paying on time which means that Papel does not keep a check of customers accounts Papel could use a debt factoring service to recoup some of the debt as a way to boost its liquidity Papel should monitor debtors and chase them to pay on time and to respect the credit periods established and agreed Creditors are increasing even though 80 of accounts are settled in cash To improve the liquidity position Papel could try to negotiate improved credit terms with its suppliers Reward candidates who highlight surplus or unused assets to sell but not a generic response of sell assets Award maximum 1 as no application is possible Accept any other relevant strategy Award 1 for a relevant generic strategy identified or described and 1 for any additional explanation in context to DD 2 cannot be awarded for the strategy if the response lacks either explanation and or application For example For an identification or a description of the strategy either debtors or creditors with or without application 1 For explanation of the strategy with no application 1 For explanation of the strategy and application 2 2

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12 N18 3 BUSMT HP2 ENG TZ0 XX M Section B 3 a Define the term public limited company 2 A public limited company is an incorporated organization listed on a Stock exchange with a legal right to sell shares to the general public Candidates are not expected to word their definition exactly as above Eg may omit mention of Stock Exchange if another feature of incorporation is present Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full clear definition that conveys knowledge and understanding similar to the answer above b With reference to QS explain two features of cradle to cradle manufacturing Cradle to cradle is a sustainable form of manufacturing QS seeks to create manufacturing principles that attempt to use production techniques that are efficient but also sustainable and waste free Two features of using cradle to cradle with reference to QS are as follows As its name suggests QS will design and produce its air conditioners in such a way that most if not all of the materials used are recyclable These materials like glass metal plastic that form parts of the air conditioners will be recyclable and used again for the production of future models This will minimise waste Cradle to cradle manufacturing with also allow QS to reuse some of the ready components of the old air conditions in the new models instead of disposing of those parts QS might have to offer some financial incentives for the customers to return their old outdated air conditioners The air conditioners will also be built with biodegradable materials if QS cannot recycle the materials for example the carton for packaging of the air conditioners This aspect will allow QS to reduce the environmental impact of its air conditioners Accept any other relevant examples and explanation Application here is very difficult all of the stimulus info is about KA and gives no real links to QS hence I believe to avoid generic responses candidates should at least make reference to air conditioners ie if responses just refer to QS and this could be replaced with any other company then this is generic and only 1 Mark as 2 2 Award 1 for each relevant feature explained and 1 for appropriate application to the organization type of products to a maximum of 2 2 cannot be awarded for the difference if the response lacks either explanation and or application For example For an identification or a description of a feature with or without application 1 For explanation of a feature with no application 1 For explanation of a feature and application 2 4

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13 c N18 3 BUSMT HP2 ENG TZ0 XX M Explain two possible human resource strategies that KA management could use to reduce employees resistance to change Two possible change management strategies as part of overall HR strategies that can be used by KA management to reduce the impact of employees resistance to change The employees are currently not involved in any decision making so it can be assumed that there is not much communication between employees and management as such open and clear communication with the employees can be seen as one possible change strategy The management should be honest and fully explain the reasons for the change The management should emphasize the positive outcome of outsourcing as a way to overcome some of the weaknesses of KA like an opportunity to improve customers perceptions The possibility of new opportunities for employees in the marketing department should be emphasized as a new and motivating challenge The management should not lie about some of the negative outcomes like job losses of those who are not going to be employed in the marketing department Before a final decision is taken KA management should change the nonparticipative way culture lack of involvement in decision making and encourage bottom up participation and consult with the employees and listen to their suggestions and opinion Some of the more motivated employees might come up with some alternative strategies and or express their preferences Management should acknowledge the fear of the unknown and the possibility of resistance to change due to fear of inability to cope with new challenges A promise of training should be provided for those who are going to be employed in the marketing department if option 2 is chosen or for all employees if option 1 is chosen Another strategy is to appoint a change champion among the employees to encourage those employees who are reluctant to change to see the benefits of both option 1 and 2 Perhaps inviting the Trade Union to put forward solutions to minimizing the negative effects or in fact making the union the change champion Do NOT accept raising salaries wages unless tied to Option 1 Clearly this strategy is not feasible for those laid off in Option 2 Accept any other relevant change HR strategy Award 1 for a relevant generic HR change management strategy identified or described and 1 for any additional explanation in context 2 cannot be awarded for the chosen change management HR strategy if the response lacks either explanation and or application For example For an identification or a description of an HR strategy with or without application 1 For explanation of an HR strategy with no application 1 For explanation of an HR strategy and application 2 Do not credit non HR strategies Analysis of strategies is not required 4

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14 d N18 3 BUSMT HP2 ENG TZ0 XX M Evaluate the two options that KA is considering Given the fact that KA redesigned their product both options will have the same starting point of being more energy efficient Some of the possible arguments for option 1 Option 1 will not result in redundancy and possible negative impact on the motivation of the remaining employees Moreover with appropriate training in order to implement the TQM and lean production practices employees might enjoy the new challenge and motivation might even increase further resulting in more efficiency and cost saving The implementation of TQM lean production should result in KA becoming considerably more environmentally friendly and by adapting to the market pressure customers demand KA might be able to capture part of the increase in demand Moreover KA should further be able to benefit from a growing demand in the market due to increase capacity of 10 However the capacity will only increase by 10 One may argue that this is a relatively small percentage for a growing market and perhaps suits KA well in the short run but it will face a major strategic decision again in the medium term Still with increasing competition perhaps a 10 increase is sufficient The financial return albeit forecasted seems reasonable do not penalise if candidates argue the opposite although we do not have information on the current interest rate for comparison Three years of payback also seem reasonable but technology is changing very rapidly and KA might have to replace the machine quite soon afterwards The current lack of finance perhaps should be judged as of less significance as KA is a PLC and shares can be issued especially to ethical and ecologically sustainable minded investors who may also be encouraged to purchase given the stated market growth Some of the possible arguments for option 2 With outsourcing KA should be able to capture the growing markets and satisfy the growing demand with excellent quality sustainable air conditions and production process One may judge this argument as highly significant for this option The excellent quality should enable KA to differentiate itself in a current undifferentiated market and create a strong USP The customer service which is possibly one of the reasons for a fall in demand in a growing market should also improve significantly Making the marketing of KA its core activity with the money saved should enable KA to be successful KA now has the finance to do so However the shareholders might disagree with such a risky strategic move as KA will move away from its current core activity of manufacturing airconditioners This move might be perceived as too risky There might be other ways of improving customer service especially if TQM is to be implemented as customers are constantly listened to Moreover closing down the production facility is a significantly risky decision It will be very difficult to rebuild one Perhaps KA should not rely on QS especially given the fact that every 2 years the contract has to be negotiated Terms and conditions could be changed in favour of QS when KA lost its bargaining power KA s management needs to pay attention to a potential loss of control 10

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15 N18 3 BUSMT HP2 ENG TZ0 XX M Overall both options can potentially enable KA to become a more environmentally and ecologically sustainable organization The second option will enable KA to achieve this in the short term however the possibility of strike action is real and this will require some significant conflict resolution strategies by KA s management Some of the good will enjoyed by KA will be undermined by this move Accept any other relevant argument for each option Accept any other substantiated judgment It is expected that candidates provide a conclusion with a substantiated judgment Marks should be allocated according to the markbands on page 3 For one relevant issue that is one sided award up to 3 For more than one relevant issue that is one sided award up to a maximum of 4 If a candidate evaluates addresses only one option award a maximum of 5 A balanced response is one that provides at least one argument for and one argument against each option Candidates may contrast one option with another for a balance as long as at least two arguments are given for each option Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgment conclusion Candidates cannot reach the 7 8 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer

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16 4 a N18 3 BUSMT HP2 ENG TZ0 XX M Define the term brand loyalty 2 Consumers faithfulness to a particular brand which will allow a business to see repeat purchasing by consumers and or over the longer term much more acceptability in raising the price of its products services Accept any other relevant definition N B no application required Do not credit examples Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition that conveys knowledge and understanding similar to the answer above b Explain two advantages for LB of using on the job training On the job training is cheaper than sending recruits on external training This is particularly advantageous for LB as there are no hotel training schools nearby External training will mean travelling and hosting costs that LB is unlikely to face due to cash flow problems Adding on external training costs could worsen LB s cash flow postilion On the job training will enable new recruits to familiarize themselves with the hotel s culture and Felix s way of doing things A recent survey has revealed that guests are pleased with LB due to employees polite and helpful attitude which means that Felix s on the job training has been effective It is unlikely that new recruits will acquire this specific know how with external training With on the job training trainees will actually serve guests while they receive training This could help LB with its cash flow problems as labour costs could be saved Felix will be able to watch the new recruits closely to follow their training He will be able to screen closely their potentialities and weaknesses and transmit the hotel s culture to them Accept any other relevant advantage Do not credit an explanation of general training Mark as 2 2 Award 1 for each correct advantage identified or described and 1 for a relevant explanation with application to LB Award up to a maximum of 2 2 cannot be awarded per advantage if the response lacks either explanation and or application For example For an identification or description of an advantage with or without application 1 For explanation of an advantage with no application 1 For explanation of an advantage and application 2 4

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17 c N18 3 BUSMT HP2 ENG TZ0 XX M Explain the importance to LB of two elements of the extended marketing mix Physical evidence is referred to as the environment in which the goods or services are delivered It is a crucial element for hotels like LB as hotel customers make their choices based on the appearance and state of hotel facilities to a great extent Guests judgements will be based on LB s physical evidence including its location at the beach to decide whether or not to book a room There is however evidence from the stimulus that LB s facilities need upgrading People makes reference to the way employees relate to and communicate with customers This is another crucial element for a hotel LB s employees are polite and helpful and particularly good with children This has proved to be very important for LB s brand loyalty and customers perceptions of it and also provides a service that is perceived as very good value for money Process could be related to the way LB provides a unique way of making payment for guests LB provides a mechanism that allows customers the opportunity to pay on departure and avoid paying in advance Accept any other relevant explanation Mark as 2 2 Award 1 for each correct element of the extended marketing mix identified and described and 1 for a relevant explanation of the importance with application to LB Award up to a maximum of 2 2 cannot be awarded per element of the extended marketing mix that has been identified if the response lacks either explanation and or application For example For an identification or a description of an element of the extended marketing mix with or without application 1 For an explanation of an element of the extended marketing mix with no application 1 For an explanation of an element of the extended marketing mix and application 2 4

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18 d N18 3 BUSMT HP2 ENG TZ0 XX M Discuss whether LB should implement proposal 1 or proposal 2 Proposal 1 LB could follow Felix s proposal to solve its cash flow problems by reducing cash outflows and raising additional finance It is probably a lower risk strategy than Rose s Negative cash outflows could be reduced by delaying payment to suppliers in winter instead of paying cash However LB could lose the generous discounts they get which in turn could lead to increasing direct costs Eventually some suppliers may not accept delayed payments and may demand cash on delivery LB could also delay hotel maintenance and refurbishments However LB already needs some upgrades Deteriorated facilities could t negatively affect customer perception and brand loyalty Sales may eventually fall LB can cut other overhead spending such as advertising or promotion costs These costs will reduce payments without affecting the quality of the service provided However future demand may fall if LB is not promoted effectively Felix could lay off some hotel staff or ask them to switch to part time working He may even close the hotel completely for the winter season However this risks losing the services and know how of key staff who may not return in the high season Felix has also proposed to raise additional finance LB could ask for a shortterm loan or look for a new business partner Probably interest rates will be lower than overdraft rates and LB could save on some costs by substituting the overdraft for a less expensive source of finance A new business partner will probably require some form of managerial control but fresh innovative thinking can be introduced into LB Alternative short term sources of finance such as the sale of assets and debts factoring seem unlikely to work for LB It seems that LB does not have assets to sell and there is no evidence that LB has many debtors Proposal 2 On the other hand Rose believes that LB s cash flow problems are due to low capacity utilization in winter She has proposed to attract a new segment of customers If new business customers come in winter cash inflows will increase However to attract these customers LB will need to build new facilities such as a convention centre or a gymnasium to cater for the needs of this particular market segment This would involve a significant amount of finance that LB does not have LB could try to find external finance such as a long term loan equity finance or a venture capitalist However these alternatives seem unlikely for LB in the short term All of them take time to be found Bank loans are expensive and LB may not have enough assets to present as collateral Floating the company could be quite expensive for a family owned business Venture capitalists are not easy to find particularly if the business is not a promise of extraordinary profits LB will need to conduct extensive market research around the new market segment and currently this will increase outflows at a time when monthly cash flows are negative 10

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19 N18 3 BUSMT HP2 ENG TZ0 XX M It can be concluded that Rose s alternative seems to be more risky and expensive than Felix s What if business customers are not attracted LB will be indebted with facilities that would remain obsolete for its current market segment Felix s proposal on the other hand seems more plausible and conservative Some of the alternatives such as delaying payments could work without much risk involved However LB should also find a way to increase inflows by tackling its capacity utilization problem Diversifying into another market segment such as elderly tourism that may not involve a great investment could help to increase inflows in winter Marks should be allocated according to the markbands on page 3 with further guidance below A balanced response is one that covers at least one argument for and one against each proposal For one relevant argument that is one sided award up to 3 For more than one relevant argument that is one sided award up to a maximum of 4 If a candidate evaluates addresses only one proposal award a maximum of 5 Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgment conclusion Candidates cannot reach the 7 8 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer

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20 5 a N18 3 BUSMT HP2 ENG TZ0 XX M Define the term innovation 2 Innovation is about putting a new idea or approach into action It can be described as the process of translating an idea invention into a service good that creates value Innovation can be achieved by improving existing goods processes or services Candidates are not expected to word the definition exactly as above N B no application required Do not credit examples on their own It is not necessary to highlight different types of innovation although credit where present Do not credit vague description of change Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition b Explain two roles of Benno s mission statement The roles of a mission statement include communicating the purpose of the organization to stakeholders informing decision making and strategy development developing the measurable goals and objectives by which to gauge the success of the organization s strategy Inspiring and motivating both internal and external stakeholders N B for full marks roles should be linked to some mention of stakeholders For Benno the mission statement has provided a way for the business to differentiate itself from its competitors especially at a time when competition in the healthy soft drinks market is intense The mission statement is also a way to attract new investors who may have empathy with the direction of Benno This is an important role given the need for Benno to be committed to innovation and CSR Award 1 for a basic answer that identifies a role of a mission statement Award 1 for a basic answer that identifies explains a role of a mission statement Award 2 for an answer that identifies explains the roles of a mission statement with application Do not reward marks for describing defining a mission statement Mark as 2 2 4

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21 c N18 3 BUSMT HP2 ENG TZ0 XX M Explain one advantage and one disadvantage for Benno of using a focus group of loyal customers Advantages of a focus group of loyal customers Can obtain detailed information about your own customers about their feelings perceptions and opinions Are cheaper than performing individual interviews Less time consuming than individual interviews Provide an opportunity to clarify any issues or problems Disadvantages of a focus group of loyal customers They can be hard to control and manage You are only getting the views of loyal customers it tells you nothing about consumers who prefer rival brands and why they prefer them to your soft drink The results are difficult to analyse especially if the focus group provides qualitative feedback Members may not reveal their own feelings but are swayed by the majority view May not be representative of the target market as a whole Possible application For Benno an advantage of using a regular focus group is that they will be aware of the company s products and mission This will reduce the amount of statistical noise and save time in the discussions when looking at new product ideas such as biodegradable rings Can help to support or otherwise secondary research regarding the importance of green credentials and of price in the soft drinks market However having a regular group for Benno increases bias and reduces objectivity of the data researched It might be a useful exercise for Benno to ask customers who are not overly familiar with their products to achieve a more balanced qualitative view Difficult to organize particularly in the target group of 12 18 year olds since they are minors and need consent to participate Accept any other relevant advantage disadvantage Accept any other relevant explanation Mark as 2 2 Award 1 for a basic answer that identifies an advantage or disadvantage of using a focus group Award 1 for an answer that identifies explains an advantage or disadvantage of using a focus group Award 2 for an answer that identifies explains an advantage or disadvantage of using a focus group and which is suitably applied to Benno Mark as 2 2 4

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22 d N18 3 BUSMT HP2 ENG TZ0 XX M Recommend whether Benno should replace its plastic drink rings with the new biodegradable drink rings For It fits in well with its mission statement to produce healthy drinks without damaging the environment and this may be important in maintaining customer loyalty It fits into its belief in corporate social responsibility as the current drink rings damage the environment and harm creatures in the seas such fish Competition in this drinks market is very intense this could act as a strengthening of its USP for Benno and retain loyal customers and attract customers from rivals It will strengthen its image as a business that has green credentials Sales of Benno s drinks have fallen significantly over the last five years so it is important that Benno does something to stem this tide Accept any other reasoned arguments Against It will cost 5m to buy the machinery to produce the new rings and the business has no accumulated retained profits therefore the funds will need to be raised probably externally via a bank loan which will lead to interest charges and an increase in operating costs It may take time to find a suitable angel investor to help finance this project Will the angel investor wish to exert some control over Benno s operations The unit cost increase is 50 a rise from 10 cents to 15 cents per ring and the business only has a net profit margin of 10 As the market is competitive and reports suggest that consumers are price sensitive a price rise passing on the cost of the new rings is probably not going to be possible The result is that Benno s net profit margin will fall Sales are falling particularly to the 12 18 age group are they going to be energized into buying a product that is more environmentally friendly particularly when reports suggest purchases of green products are not increasing In terms of a new way forward for Benno the introduction of the new rings has a great deal of merit There are a large number of marketing opportunities available in a competitive market and this idea will strengthen Benno s brand However the forecasted financial implications of this idea are not ideal and if sales volumes do not increase significantly then Benno may find itself financially worse off if profits do not increase One solution may be to wait until some more objective market research via a new untested focus group have given their thoughts on the new ring Accept any other reasoned arguments Marks should be allocated according to the mark bands on page 3 with further guidance below A balanced response is one that provides at least two arguments for and two arguments against the option For one relevant issue that is one sided award up to 3 For more than one relevant issue that is one sided award up to a maximum of 4 10

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24 N18 3 BUSMT HP2 ENG TZ0 XX M Section C Marks should be allocated using the assessment criteria on pages 4 to 5 with further guidance below N B examiners should include a breakdown of each mark awarded per criterion and a brief note explaining the mark awarded at the end of each candidate s response The main aim of paper 2 SL or HL section C is to assess candidates understanding of the six major concepts change culture ethics globalization innovation strategy within a business context Candidates are to demonstrate their understanding through an organization of their choice The expectation of the use of an organization is to allow assessment of the depth of candidates understanding through their ability to apply the concepts and their knowledge Assessment of candidates knowledge of the organization itself is not an aim of the assessment If a candidate makes minor factual errors and these minor errors have no genuine bearing on whether the candidate understands the concepts examiners should not penalize For example a minor error of historical fact the year when a company was founded or the year in which a change was implemented which has no genuine bearing on candidates understanding of the concepts does not warrant penalty 6 7 8 With reference to an organization of your choice examine the impact of innovation on promotional strategy 20 With reference to an organization of your choice examine the impact of globalization on change in operations management 20 With reference to an organization of your choice examine the impact of ethics and culture on human resource management 20 It is expected that the candidate explains the chosen theoretical direction content of their response Additional guidance in relation to the assessment criteria For each criterion the aim is to find the descriptor that conveys most accurately the level attained by the candidate using the best fit model It is not necessary for every single aspect of a level descriptor to be met for that mark to be awarded The highest level descriptors do not imply faultless performance and should be achievable by a candidate A candidate who attains a high level of achievement for one criterion will not necessarily reach high levels of achievement for the other criteria and vice versa If only one concept is addressed Criteria A B C and E award up to a maximum 3 Criterion D full marks can be awarded Where the question asks for impacts of two concepts on content examiners must allow for unbalanced treatment of the two concepts throughout a candidate s response One concept may be more significant than the other

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25 N18 3 BUSMT HP2 ENG TZ0 XX M In section C the question rubric explicitly states that organizations featured in sections A and B and in the paper 1 case study may not be used as a basis to candidate s answers to questions 6 7 and 8 When this happens please award marks as follows Criterion A Award a maximum of 1 The business management content cannot be relevant if the organization is fictitious Criterion B 0 marks there is no connection to a real world organization Criterion C Award a maximum of 1 The arguments cannot be relevant if the organization is fictitious Criterion D Mark as normal Criterion E Award up to a maximum of 1 The individual and or group perspective s cannot be relevant if the organization is fictitious Criterion B For 2 connection is not developed should be treated the same as superficial Criterion C Questions 6 to 8 require consideration of the impact of one concept on a second concept therefore accept 2 2 arguments for a balanced response Justification is through logic or data For 2 there is no balance as there are no counter arguments at all or the arguments are all one sided then this would be unjustified For 3 there is some balanced arguments some of which are justified Criterion D Introductions need to be concise and related to the question The candidate s response does not to have explicit headings for each structural element A body is the area in which the substance of arguments occur It is usually located between the introduction and the conclusion Fit for purpose paragraph means that ideas are presented in a clear academic way For example one idea per paragraph Criterion E One example of an individual could be an individual consumer or an individual manager However this could not be considered with a group of consumers or a management team For 4 a balanced response need to look at the perspectives of both individual and group s The chosen individual group needs to be applicable and relevant to the question with specific explanation Candidates need to go beyond stating the stakeholder Candidates need not explicitly say stakeholders

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2 N18 3 BUSMT SP2 ENG TZ0 XX Section A Answer one question from this section 1 Piper Industrial PI Piper Industrial PI manufactures pipe The company is highly profitable and its corporate tax rate is 20 PI is forecasting major capital expenditure for 2019 Table 1 Selected forecast financial information for the year ending 31 December 2019 Cost of goods sold Expenses Gross profit 15 000 000 4 700 000 X Interest 1 000 000 Net profit after interest and tax 3 440 000 Net profit before interest and tax 5 300 000 Net profit before tax 4 300 000 Sales revenue Tax 25 000 000 Y Table 2 Annual cash flow forecast for the year ending 31 December 2019 Receipts from debtors 24 000 000 Total receipts 24 000 000 Payments to creditors 14 000 000 Payments for expenses 4 600 000 Payments to banks for debt 1 200 000 Capital expenditure 2 700 000 Total payments Net cash flow 22 500 000 Z Opening balance 3 700 000 Closing balance 5 200 000 This question continues on the following page

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4 2 N18 3 BUSMT S P2 ENG TZ0 XX Patras Furniture PF Patras Furniture PF manufactures chairs PF uses batch production Currently PF sells 200 chairs per month Each chair sells at an average price of 100 Below are the forecasted fixed and variable costs for 2019 Table 1 Fixed costs Rent 24 000 Insurance 6000 Salaries 11 000 Lease on equipment 40 000 Cleaning service 18 000 Table 2 Variable costs per chair Material 50 Delivery 5 a Define the term batch production 2 b i Calculate the break even level of output for PF for 2019 show all your working 2 ii Construct a fully labelled break even chart to scale for PF for 2019 4 iii Calculate the forecasted profit if PF sells 2400 chairs in 2019 show all your working 2

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5 N18 3 BUSMT SP2 ENG TZ0 XX Section B Answer one question from this section 3 Jacob Strutz JS Jacob Strutz JS is an American multinational company that produces jeans Founded in 1860 for 100 years JS enjoyed steady growth in sales mostly in the United States and then in Canada and Mexico In the 1960s and 1970s when teenagers worldwide began wearing jeans JS s sales increased significantly JS s premier product is Strutz s No 5 jeans one of the best known brands in the world In the late 1970s JS operated 71 factories in the United States In 1994 its sales peaked at 7 6 billion worldwide but then began to decline In 2002 JS made the decision to close its last remaining factories and outsource manufacturing to foreign manufacturers whose quality was more difficult to control By 2017 annual sales were only 4 5 billion Even sales of Strutz s No 5 jeans declined and JS faced intense competition including foreign competition JS briefly experimented with fast fashion an industry practice developed in the United States in response to cheap foreign imports In fast fashion new design concepts are quickly manufactured once they have been tested at fashion shows Unfortunately fast fashion worked against JS s brand identity Surveys indicated that JS s brand has value and inspires loyalty though focus groups of young consumers did not perceive JS as cool JS has been a leader in corporate social responsibility CSR Since the 1890s it has pursued profits through values More recently JS introduced Strutz s chemical free jeans Because many of JS s suppliers operate in areas with few pollution regulations to remain consistent with its image of CSR JS is insisting that suppliers follow innovative but expensive chemical free processes a Define the term multinational company MNC b Explain the importance to JS of c d 2 i brand value 2 ii brand loyalty 2 i Draw and label a product life cycle for Strutz s No 5 jeans 2 ii Explain the position of Strutz s No 5 jeans on the product life cycle 2 Discuss the role and impact of globalization on the growth and evolution of JS 10 Turn over

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6 4 N18 3 BUSMT SP2 ENG TZ0 XX Dana s Handbags DH Dana s Handbags DH is a small manufacturer of women s handbags DH sells directly to large retail chains in Europe The company is privately owned and has fifteen shareholders Table 1 Selected financial data for DH for 2016 and 2017 figures in 000s 2016 2017 Sales revenue 28 000 29 000 Cost of goods sold 14 000 15 000 Gross profit 14 000 14 000 Net profit after interest and tax 1370 1300 Total current assets at year end 5000 5200 Total current liabilities at year end 3000 3500 Stock inventory 3000 3200 Cash 1000 900 Beginning in 2017 DH adopted a programme of corporate social responsibility CSR by donating money to charities encouraging employees to do three paid hours per week of community service during work hours using only biodegradable materials in its handbags This programme was expensive DH s management thought that a programme of corporate social responsibility CSR would strengthen DH s brand During the first year of the corporate social responsibility CSR programme employee morale improved and DH received favourable media attention However at the annual general meeting in January 2018 financial results from 2017 revealed that sales growth had not improved Several influential shareholders complained about the high cost of the corporate social responsibility CSR programme Other shareholders suggested that DH should develop consumer awareness that it is a socially responsible company a Identify two features of a private limited company b Calculate 2 i the net profit margins for DH for 2016 and 2017 2 ii net current assets working capital for DH for 2016 and 2017 2 c Explain one method of above the line promotion and one method of below theline promotion that DH could use to raise consumer awareness that it is a socially responsible company 4 d Discuss DH s decision to develop a policy of corporate social responsibility CSR 10

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7 5 N18 3 BUSMT SP2 ENG TZ0 XX Benno Benno is a soft drinks manufacturer Its mission statement is to produce healthy drinks without damaging the environment Competition in the healthy soft drinks market is fierce Benno uses a competitive pricing strategy However sales of Benno s drinks have fallen significantly over the last five years particularly in the 12 18 age group The business has no accumulated retained profits Benno is committed to innovation and corporate social responsibility CSR Its research and development division has recently invented a new biodegradable drink pack ring that starts to break down within two hours of contact with sea water It dissolves fully in 48 hours Currently 98 of pack rings are made of plastic and when dumped in the sea are responsible for the death of many sea creatures A focus group of loyal customers used regularly by Benno s marketing department is wholeheartedly in favour of the new drink rings However the marketing director has read recent studies that suggest purchases of green products are not increasing despite the positive attitude of many consumers towards sustainability and biodegradable products consumers continue to prioritize price when purchasing soft drinks To manufacture the new drink rings machinery costing 5 million would be needed Drink ring production unit costs would rise from 10 cents to 15 cents and prices of a six pack of Benno soft drinks would have to increase by 5 Benno s net profit margin on a six pack is 10 Benno s director of corporate social responsibility favours the change to the new drink rings but is opposed by both the finance director and marketing directors Source Image provided with permission from E6PR a Define the term innovation 2 b Explain two roles of Benno s mission statement 4 c Explain one advantage and one disadvantage for Benno of using a focus group of loyal customers d Recommend whether Benno should replace its plastic drink rings with the new biodegradable drink rings 4 10 Turn over

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3 N18 3 BUSMT SP2 ENG TZ0 XX M The markbands and assessment criteria on pages 3 5 should be used where indicated in the markscheme Marks 0 1 2 Level descriptor The work does not reach a standard described by the descriptors below 3 4 5 6 7 8 9 10 Little understanding of the demands of the question Few business management tools where applicable techniques and theories are explained or applied and business management terminology is lacking Little reference to the stimulus material Some understanding of the demands of the question Some relevant business management tools where applicable techniques and theories are explained or applied and some appropriate terminology is used Some reference to the stimulus material but often not going beyond the name of a person s and or the name of the organization Understanding of most of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied and appropriate terminology is used most of the time Some reference to the stimulus material that goes beyond the name of a person s and or the name of the organization Some evidence of a balanced response Some judgments are relevant but not substantiated Good understanding of the demands of the question Relevant business management tools where applicable techniques and theories are explained and applied well and appropriate terminology is used Good reference to the stimulus material Good evidence of a balanced response The judgments are relevant but not always well substantiated Good understanding of the demands of the question including implications where relevant Relevant business management tools where applicable techniques and theories are explained clearly and applied purposefully and appropriate terminology is used throughout the response Effective use of the stimulus material in a way that significantly strengthens the response Evidence of balance is consistent throughout the response The judgments are relevant and well substantiated

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4 N18 3 BUSMT SP2 ENG TZ0 XX M Assessment criteria for Section C Criterion A Knowledge and conceptual understanding This criterion addresses the extent to which the candidate demonstrates knowledge and understanding of the given concepts and relevant business management content theories techniques or tools depending on the requirements of the question Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Superficial knowledge of the given concepts is demonstrated Business management content is not selected or the content selected is irrelevant Satisfactory understanding of one or both of the given concepts is demonstrated Some business management content selected is relevant The relevant content is satisfactorily explained Good understanding of one or both of the given concepts is demonstrated The business management content selected is relevant though it may not be sufficient The relevant content is generally well explained though the explanation may lack some depth or breadth Good understanding of both of the given concepts is demonstrated The business management content selected is relevant sufficient and well explained Criterion B Application This criterion addresses the extent to which the candidate is able to apply the given concepts and the relevant business management content theories techniques or tools depending on the requirements of the question to his or her chosen real world organization s The realworld organization s must not be the organization featured in the prescribed case study for paper 1 Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below The given concepts and or any relevant business management content are connected to the real world organization s but this connection is inappropriate or superficial The given concepts and or relevant business management content are connected appropriately to the real world organization s but this connection is not developed The given concepts and relevant business management content are generally well applied to explain the situation and issues of the real world organization s though the explanation may lack some depth or breadth Examples are provided The given concepts and relevant business management content are well applied to explain the situation and issues of the real world organization s Examples are appropriate and illustrative

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5 N18 3 BUSMT SP2 ENG TZ0 XX M Criterion C Reasoned arguments This criterion assesses the extent to which the candidate makes reasoned arguments This includes making relevant and balanced arguments by for example exploring different practices weighing up their strengths and weaknesses comparing and contrasting them or considering their implications depending on the requirements of the question It also includes justifying the arguments by presenting reasonable evidence or other support for the claims made Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Statements are made but these are superficial Relevant arguments are made but these are mostly unjustified Relevant arguments are made and these are mostly justified Relevant balanced arguments are made and these are well justified Criterion D Structure This criterion assesses the extent to which the candidate organizes his or her ideas with clarity and presents a structured piece of writing comprised of an introduction a body a conclusion fit for purpose paragraphs Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below Two or fewer of the structural elements are present and few ideas are clearly organized Three of the structural elements are present or most ideas are clearly organized Three or four of the structural elements are present and most ideas are clearly organized All of the structural elements are present and ideas are clearly organized Criterion E Individuals and societies This criterion assesses the extent to which the candidate is able to give balanced consideration to the perspectives of a range of relevant stakeholders including individuals and groups internal and external to the organization Marks 0 1 2 3 4 Level descriptor The work does not reach a standard described by the descriptors below One individual or group perspective is considered superficially or inappropriately One relevant individual or group perspective is considered appropriately or two relevant individual or group perspectives are considered superficially or inappropriately At least two relevant individual or group perspectives are considered appropriately Balanced consideration is given to relevant individual and group perspectives

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N18 3 BUSMT SP2 ENG TZ0 XX M 6 Section A 1 a Define the term capital expenditure 2 Capital expenditure refers to the purchase by a business of long term assets assets that have a useful life longer than one year Award 1 mark for partial understanding and knowledge and 2 for a complete definition as the above though candidates do not have to use the precise wording above b Using Table 1 calculate for PI i gross profit X Gross profit is 10 000 000 Candidate is not required to show workings Award 1 for the correct answer ii tax Y Tax is 860 000 Candidate is not required to show workings Award 1 for the correct answer If a candidate provides NR or some other answer that appears incorrect but then calculates tax correctly in c below award 1 c Using Table 1 and your calculations in b i and ii construct a profit and loss account for PI All figures in 000s Sales revenue 25 000 Cost of goods sold 15 000 Gross profit 10 000 Expenses Net profit before interest and taxes Interest 4700 Net profit before tax 4300 Tax Net profit after interest and tax X 5300 1000 860 Y 3440 If the candidate has some idea what a profit and loss account is award an additional 1 mark If the candidate produces a profit and loss account that is correct and conforms to the IB format as above award 2 Maximum award 2 N B The candidate must follow the IB format However be flexible if candidates use slightly different wording such as Pre tax profit rather than Net profit before tax as long as the correct meaning is conveyed 2

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7 d N18 3 BUSMT SP2 ENG TZ0 XX M Using Table 2 calculate the net cash flow Z for PI for 2019 show all your working 2 Net cash flow is 1 500 000 calculated as follows 24 000 000 total receipts 22 500 000 total payments 1 500 000 net cash flow Award 1 for the correct answer and 1 for workings Accept alternative methods provided they are correct methods e Explain the difference between profit and cash flow Profit is typically calculated on an accrual basis when revenue or expense actually accrues to the business but does not reflect the actual movement of funds Cash flow reflects the actual movement of funds when a business receives payment and makes a payment Thus a timing difference can exist between the accrual of a revenue or an expense and the actual receipt of funds Award 1 for partial understanding and explanation and 2 marks for a complete understanding and explanation A candidate does not have actually to use the word accrual but they must convey understanding of a timing difference between the profit and loss account and the cash flow An alternative way that a candidate can earn 2 is by defining profit revenue minus expenses and then explaining that cash flow is the movement of funds such as external financing an inflow or debt service an outflow or some other specific examples of inflows and outflows 2

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8 2 a N18 3 BUSMT SP2 ENG TZ0 XX M Define the term batch production 2 Batch production involves making a group of identical items together and each stage of operation is performed on the whole group before it moves on to the next stage Candidates are not expected to word their definition exactly as above Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full clear definition that conveys knowledge and understanding such as stating that batch production involves a group of identical items made at the same time and then moving on to the next stage together b i Calculate the break even level of output for PF for 2019 show all your working 2 Fixed costs 24 000 6000 11 000 40 000 18 000 99 000 Contribution 100 50 5 45 99 000 2200 chairs must be sold to break even 45 Award 1 for working or formula and 1 for the correct answer Award up to a maximum of 2 ii Construct a fully labelled break even chart to scale for PF for 2019 4

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9 N18 3 BUSMT SP2 ENG TZ0 XX M Award marks as follows 1 for both appropriately labelled axes 1 for an accurately drawn and labelled total revenue curve 1 for an accurately drawn and labelled total costs curve 1 for the identification of the break even level of output Award 0 if a candidate produces a table and award no more than 2 if the chart is not neat not drawn with a straight edge or is not to scale Ideally the candidate will draw an arrow pointing to the break even point and label the arrow However accept as an appropriately labelled breakeven point a vertical line from the x axis to the break even point iii Calculate the forecasted profit if PF sells 2400 chairs in 2019 show all your working 2400 x 100 Sales revenue Less Variable costs 50 5 x 2400 Less Fixed costs Forecasted profit 240 000 9000 Another possible response is 2400 2200 45 9000 Reward other acceptable methods of calculating forecasted profit on sales of 2400 chairs Award 1 for working or formula and 1 for the correct answer Award up to a maximum of 2 2

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10 N18 3 BUSMT SP2 ENG TZ0 XX M Section B 3 a Define the term multinational company MNC 2 A multinational corporation is a company that operates in two or more countries A multinational company needs to have a base in those countries not just sell goods and services there Award 1 for a partial understanding that conveys some understanding and 2 for a complete response that shows full understanding Candidates do not have to word exactly as above If candidates equate being a multinational corporation with being a global organization without any further qualification or explanation maximum award 1 b Explain the importance to JS of i brand value 2 Brand value refers to the premium customers or potential customers are willing to pay for a product compared to the competition For example if jeans roughly comparable to Jacob Strutz s products sell for 10 less some dollar amount can be specifically attached to the value of the JS brand For 2 candidates must define explain and apply the concept of brand value to JS Award 1 for some partial response ii brand loyalty Brand loyalty refers to the loyalty that customers attach to a particular brand whether for repeat purchases of the same product jeans or the purchase of new products traded under the brand name jeans jackets for example In the case of JS it has strong brand loyalty based upon on 100 years of successful marketing Many customers are loyal to JS even though they could buy other jeans for less or buy jeans that have a certain trendiness now For 2 candidates must define explain and apply the concept of brand loyalty to JS Award 1 for some partial response 2

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11 c i N18 3 BUSMT SP2 ENG TZ0 XX M Draw and label a product life cycle for Strutz s No 5 jeans 2 Award 1 mark for some idea of the product life cycle Award 2 if a candidate draws a product life cycle and correctly provides at least four stages Maximum award 2 N B If the candidate has not labelled the axes or has incorrectly labelled the axes maximum award 1 Please be flexible if the candidate uses wording slightly different than in the markscheme sales or revenue rather than sales revenue is fine However for the Y axis do not accept market value or value of the product or other wording that suggests some limited understanding but is otherwise inaccurate ii Explain the position of Strutz s No 5 jeans on the product life cycle 2 JS s position is in the decline stage of the product life cycle Despite strong brand loyalty an ageing baby boomer population is buying fewer jeans thus JS s sales are down while presumably young people are buying cheaper jeans made outside the US or more fashionable jeans made by designers Regardless JS s sales are down considerably from their peak For 2 candidates must explain and apply the concept of product life cycle to JS Award 1 for some partial response d Discuss the role and impact of globalization on the growth and evolution of JS The role and impact of globalization on JS has been considerable and includes sales growth to 7 6 billion dollars which the stimulus implies was based upon sales around the world the opportunities for offshoring which has led to the closure of all of JS s manufacturing facilities in the US and presumably allowed JS to cut costs and remain competitive foreign competition which has proven significantly challenging for JS whose sales have decline considerably the nature of JS s program of corporate social responsibility CSR which has a very globally fashionable triple bottom line focus especially its Strutz s chemical free jeans Accept any other relevant point 10

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12 N18 3 BUSMT SP2 ENG TZ0 XX M In each of these ways Strutz has been influenced by globalization Some have been very positive for JS increased sales for many years and lower costs and some have taken a toll on JS foreign competition and pressure for more expensive programmes of CSR JS must continue to seek out opportunities and minimize threats from a changing world Of importance for JS is either to find extension strategies that will makes its core products relevant again in the global market place or find new products to sell under its highly recognized and valued brand For a balanced argument a candidate must have two arguments showing the benefits of globalization and two arguments showing how globalization has posed some challenges At least one of the arguments for and against can be purely theoretical while at least one argument for and one argument against must be based upon application to the stimulus If the candidate does not make judgements on conclusions maximum award 6 Maximum Mark award Positive Impact Negative Impact Judgments conclusion 3 Either one positive impact or one negative impact N A 4 Addresses either 1 one positive impact and one negative impact 2 two positive impacts or two negative impact N A 5 Addresses either 1 two positive impacts and one negative impact 2 two negative impacts against and one positive impact N A 6 Positive impacts and negative impact 7 8 9 10 No judgments conclusions Balanced Judgments conclusions based upon analysis and explanation in the body of the response Balanced Judgments conclusions based upon analysis and explanation in the body of the response

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13 4 a N18 3 BUSMT SP2 ENG TZ0 XX M Identify two features of a private limited company 2 Features of a private limited company include shareholders have limited liability ownership of shares is restricted to a small number of investors varies from country to country but in general is a low number information does not have to be shared publicly it is less costly to manage shareholders because of lesser disclosure and other legal requirements it is a separate legal entity distinct from the owners of its shares Accept any other relevant feature Award 1 for each feature identified up to 2 b Calculate i the net profit margins for DH for 2016 and 2017 2016 1370 4 89 28 000 2 2017 1300 4 48 29 000 Award 1 for each correct answer Showing working is not required Accept 4 9 2016 and 4 5 2017 but do not accept 5 2016 or 4 or 5 2017 ii net current assets working capital for DH for 2016 and 2017 In 000s of dollars 2016 5000 3000 2000 2017 5200 3500 1700 Award 1 for each correct answer Showing working is not required 2

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14 c N18 3 BUSMT SP2 ENG TZ0 XX M Explain one method of above the line promotion and one method of below theline promotion that DH could use to raise consumer awareness that it is a socially responsible company 4 Methods of above the line promotion that DH could use include television advertising radio advertising advertising in newspapers journals magazines or trade journals cinema advertising billboards Methods of below the line promotion that DH could use include direct mailing exhibitions and trade fairs sponsorship public relations celebrity endorsement personal selling Do not accept word of mouth as a form of below the line promotion Accept any other appropriate form of above the line or below the line promotion Mark as a 2 2 Award 1 for an appropriate above the line method identified and an additional 1 for development of the explanation illustrating the appropriateness of the method with respect to DH Award 1 for an appropriate below the line method identified and an additional 1 for development of the explanation illustrating the appropriateness of the method with respect to DH Maximum award 4 If the answer has methods but no application or just mentions the name of the business then award a maximum of 2 overall d Discuss DH s decision to develop a policy of corporate social responsibility CSR DH s decision to develop a policy of corporate social responsibility CSR fits well with trends in business today whereby many companies are doing so Indeed sometimes today stakeholder groups exert powerful pressure on companies to practice CSR The pressure to follow triple bottom line reporting is also influencing companies to act in a more socially responsible way despite some criticism of CSR by certain economists DH has adopted several approaches that are popular today giving profits lending employees and being more environmentally friendly All these methods have garnered DH favourable media attention though less clear is if DH s brand identity has benefited Sales growth has not improved The gross profit margin decreased from 50 to 48 28 and the net profit margin declined from 4 89 to 4 48 The costs of donating profits lending employees and presumably higher priced biodegradable materials took a toll on profits The situation also negatively affected the balance sheet which saw a deteriorated working capital position falling from 2 000 000 to 1 700 000 10

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15 N18 3 BUSMT SP2 ENG TZ0 XX M One of the commonly cited reasons for practicing CSR is that it is a form of enlightened self interest doing good for others will in the long run lead to greater profits In the case of DH perhaps that was its intention Employee morale improved which can lead to greater productivity and loyalty labour turnover would probably decline CSR would enhance DH s reputation socially responsible consumers would find an additional reason to purchase DH products and over time the company would make more profits than it otherwise would have Some shareholders however are not satisfied with the results so far At the annual general meeting they complained about unimproved sales growth and lower margins which they directly linked to the CSR programme Several shareholders suggested that DH develop consumer awareness that it is a socially responsible company The favourable media attention in the first year was insufficient to make an impact on the revenue side Were DH to take this approach reshape its brand identity and raise consumer awareness it would have to invest in a promotional and public relations campaign which might be costly Profits and margins might go down before they go up and possibly even more shareholders will be dissatisfied Accept any other relevant evaluation Marks should be allocated according to the markbands on page 3 For a limited discussion of the financial situation income statement only or balance sheet statement only award up to 3 For limited discussion of financial situation and one relevant non quantitative consideration award up to a maximum of 4 If a candidate evaluates addresses only the financial situation or only nonfinancial considerations award a maximum of 5 Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgement conclusion Candidates cannot reach the 7 8 markband if they give judgement conclusions that are not based on analysis explanation already given in their answer

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16 Maximum Mark award For Either one argument for or one argument against N A 4 Addresses either 1 one argument for and one argument against 2 two arguments for or two arguments against N A 5 Addresses either 1 two arguments for and one argument against 2 two arguments against and one argument for N A 6 two arguments for and two arguments against 9 10 a Judgments conclusion 3 7 8 5 Against N18 3 BUSMT SP2 ENG TZ0 XX M No judgments conclusions Balanced Judgments conclusions based upon analysis and explanation in the body of the response Balanced Judgments conclusions based upon analysis and explanation in the body of the response Define the term innovation 2 Innovation is about putting a new idea or approach into action It can be described as the process of translating an idea invention into a service good that creates value Innovation can be achieved by improving existing goods processes or services Candidates are not expected to word the definition exactly as above Award 1 if the candidate recognizes that innovation is the creation or invention of something original Award 2 marks if the candidate also recognizes that the new invention or process has value 2 N B no application required Do not credit examples on their own Award 1 for a basic definition that conveys partial knowledge and understanding Award 2 for a full definition b Explain two roles of Benno s mission statement The roles of a mission statement include communicating the purpose of the organization to stakeholders informing decision making and strategy development developing the measurable goals and objectives by which to gauge the success of the organization s strategy For Benno the mission statement has provided a way for the business to differentiate itself from its competitors especially at a time when competition in the healthy soft drinks market is intense 4

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17 N18 3 BUSMT SP2 ENG TZ0 XX M The mission statement is also a way to attract new investors who may have empathy with the direction of Benno This is an important role given the need for Benno to be committed to innovation and CSR Award 1 for a basic answer that shows an understanding of a role of a mission statement Award 2 for an answer that shows an understanding of two roles of a mission statement Award 3 for an answer that shows a good understanding of two roles of a mission statement and one of these is suitably applied to Benno Award 4 for an answer that shows a good understanding of two roles of a mission statement and both of these is suitably applied to Benno Do not reward marks for describing defining a mission statement c Explain one advantage and one disadvantage for Benno of using a focus group of loyal customers Advantages of a focus group of loyal customers Can obtain detailed information about your own customers about their feelings perceptions and opinions Are cheaper than performing individual interviews Provide an opportunity to clarify any issues or problems Disadvantages of a focus group of loyal customers They can be hard to control and manage You are only getting the views of loyal customers it tells you nothing about consumers who prefer rival brands and why they prefer them to your soft drink The results are difficult to analyse especially if the focus group provides qualitative feedback Members may not reveal their own feelings but are swayed by the majority view May not be representative of the target market as a whole Possible application For Benno an advantage of using a regular focus group is that they will be aware of the company s products and mission This will reduce the amount of statistical noise and save time in the discussions when looking at new product ideas such the biodegradable rings However having a regular group for Benno increases bias and reduces objectivity of the data researched It might be a useful exercise for Benno to ask customers who are not overly familiar with their products to achieve a more balanced qualitative view Accept any other relevant advantage disadvantage Accept any other relevant explanation Mark as 2 2 4

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18 N18 3 BUSMT SP2 ENG TZ0 XX M Award 1 for a basic answer that shows an understanding of an advantage of using a focus group Award 2 for an answer that shows an understanding of an advantage and disadvantage of using a focus group Award 3 for an answer that shows an understanding of an advantage and disadvantage of using a focus group of loyal customers and one of these is suitable applied to Benno Award 4 for an answer that shows an understanding of an advantage and disadvantage of using a focus group of loyal customers and both of these is suitable applied to Benno Mark as 2 2 d Recommend whether Benno should replace its plastic drink rings with the new biodegradable drink rings For It fits in well with its mission statement to produce healthy drinks without damaging the environment and this may be important in maintaining customer loyalty It fits into its belief in corporate social responsibility as the current drink rings damage the environment and harm creatures in the seas such fish Competition in this drinks market is very intense this could act as a strengthening of its USP for Benno and retain loyal customers and attract customers from rivals It will strengthen its image as a business that has green credentials Sales of Benno s drinks have fallen significantly over the last five years so it is important that Benno does something to stem this tide Accept any other reasoned arguments Against It will cost 5m to buy the machinery to produce the new rings and the business has no accumulated retained profits therefore the funds will need to be raised probably externally via a bank loan which will lead to interest charges and an increase in operating costs It may take time to find a suitable angel investor to help finance this project Will the angel investor wish to exert some control over Benno s operations The unit cost increase is 50 a rise from 10 cents to 15 cents per ring and the business only has a net profit margin of 10 As the market is competitive and reports suggest that consumers are price sensitive a price rise passing on the cost of the new rings is probably not going to be possible The result is that Benno s net profit margin will fall Sales are falling particularly to the 12 18 age group are they going to be energized into buying a product that is more environmentally friendly particularly when reports suggest purchases of green products are not increasing In terms of a new way forward for Benno the introduction of the new rings has a great deal of merit There are a large number of marketing opportunities available in a competitive market and this idea will strengthen Benno s brand However the forecasted financial implications of this idea are 10

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19 N18 3 BUSMT SP2 ENG TZ0 XX M not ideal and if sales volumes do not increase significantly then Benno may find itself financially worse off if profits do not increase One solution may be to wait until some more objective market research via a new untested focus group have given their thoughts on the new ring Accept any other reasoned arguments Marks should be allocated according to the mark bands on page 3 with further guidance below A balanced response is one that provides at least two arguments for and two arguments against the option For one relevant issue that is one sided award up to 3 For more than one relevant issue that is one sided award up to a maximum of 4 Award a maximum of 6 if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgement conclusion Candidates cannot reach the 7 8 markband if they give judgement conclusions that are not based on analysis explanation already given in their answer Maximum Mark award For Against Judgments conclusion 3 Either one argument for or one argument against N A 4 Addresses either 1 one argument for and one argument against 2 two arguments for or two arguments against N A 5 Addresses either 1 two arguments for and one argument against 2 two arguments against and one argument for N A 6 two arguments for and two arguments against 7 8 9 10 No judgments conclusions Balanced Judgments conclusions based upon analysis and explanation in the body of the response Balanced Judgments conclusions based upon analysis and explanation in the body of the response

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20 N18 3 BUSMT SP2 ENG TZ0 XX M Section C Marks should be allocated using the assessment criteria on pages 4 to 5 with further guidance below N B examiners should include a breakdown of each mark awarded per criterion and a brief note explaining the mark awarded at the end of each candidate s response The main aim of paper 2 SL or HL section C is to assess candidates understanding of the six major concepts change culture ethics globalization innovation strategy within a business context Candidates are to demonstrate their understanding through an organization of their choice The expectation of the use of an organization is to allow assessment of the depth of candidates understanding through their ability to apply the concepts and their knowledge Assessment of candidates knowledge of the organization itself is not an aim of the assessment If a candidate makes minor factual errors and these minor errors have no genuine bearing on whether the candidate understands the concepts examiners should not penalize For example a minor error of historical fact the year when a company was founded or the year in which a change was implemented which has no genuine bearing on candidates understanding of the concepts does not warrant penalty 6 7 8 With reference to an organization of your choice examine the impact of innovation on promotional strategy 20 With reference to an organization of your choice examine the impact of globalization on change in operations management 20 With reference to an organization of your choice examine the impact of ethics and culture on human resource management 20 It is expected that the candidate explains the chosen theoretical direction content of their response Additional guidance in relation to the assessment criteria For each criterion the aim is to find the descriptor that conveys most accurately the level attained by the candidate using the best fit model It is not necessary for every single aspect of a level descriptor to be met for that mark to be awarded The highest level descriptors do not imply faultless performance and should be achievable by a candidate A candidate who attains a high level of achievement for one criterion will not necessarily reach high levels of achievement for the other criteria and vice versa If only one concept is addressed Criteria A B C and E award up to a maximum 3 Criterion D full marks can be awarded Where the question asks for impacts of two concepts on content examiners must allow for unbalanced treatment of the two concepts throughout a candidate s response One concept may be more significant than the other

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21 N18 3 BUSMT SP2 ENG TZ0 XX M In section C the question rubric explicitly states that organizations featured in sections A and B and in the paper 1 case study may not be used as a basis to candidate s answers to questions 6 7 and 8 When this happens please award marks as follows Criterion A Award a maximum of 1 The business management content cannot be relevant if the organization is fictitious Criterion B 0 marks there is no connection to a real world organization Criterion C Award a maximum of 1 The arguments cannot be relevant if the organization is fictitious Criterion D Mark as normal Criterion E Award up to a maximum of 1 The individual and or group perspective s cannot be relevant if the organization is fictitious Criterion B For 2 connection is not developed should be treated the same as superficial Criterion C Questions 6 to 8 require consideration of the impact of one concept on a second concept therefore accept 2 2 arguments for a balanced response Justification is through logic or data For 2 there is no balance as there are no counter arguments at all or the arguments are all one sided then this would be unjustified For 3 there is some balanced arguments some of which are justified Criterion D Introductions need to be concise and related to the question The candidate s response does not to have explicit headings for each structural element A body is the area in which the substance of arguments occur It is usually located between the introduction and the conclusion Fit for purpose paragraph means that ideas are presented in a clear academic way For example one idea per paragraph Criterion E One example of an individual could be an individual consumer or an individual manager However this could not be considered with a group of consumers or a management team For 4 a balanced response need to look at the perspectives of both individual and group s The chosen individual group needs to be applicable and relevant to the question with specific explanation Candidates need to go beyond stating the stakeholder Candidates need not explicitly say stakeholders