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2 M N15 3 BUSMT BP1 ENG TZ0 XX CS LadyA Her real name is Mar a Immaculada Alejandra Gonz lez Carroccio but everyone knows her as LadyA 5 10 15 20 25 30 35 40 In 1973 her parents fled Cuba and moved to Florida United States US where they were granted political asylum The Carroccios had limited savings but were determined to succeed Mr Carroccio thought that working independently and operating as a sole trader would be the best way to achieve financial security He wanted to set up his own business a small shoe repair shop in their Spanish speaking neighbourhood in Miami As his cash flow forecasts were weak he got turned down several times for bank loans however he managed to obtain a small grant from a government agency that helped entrepreneurs Mrs Carroccio also had difficulties at first because she did not speak much English She attended classes organized by a local charity a non profit organization whose mission statement was to help all adult immigrants learn English She eventually found a job in the cafeteria of a local school Although the wage was low she received training and some fringe payments such as health insurance With the profits from Mr Carroccio s shoe repair shop and Mrs Carroccio s wage the family eventually maintained an economically stable household In 1978 Alejandra their first child was born Mr and Mrs Carroccio wanted her to have a normal American life Although at home they mainly spoke Spanish with each other they wanted Alejandra to speak English with them They encouraged her to sing in choral groups at school and at church and they paid for her after school dance lessons Alejandra was a beautiful girl At the age of 12 she started getting occasional jobs as a model for local fashion catalogues and magazines Her parents put her earnings into a college fund a special savings account that would pay for her to attend university later The modelling eventually led to small acting roles in films when production companies recruited in Miami Then in 1994 a casting director needed a young Hispanic American woman who could sing and dance in one scene in the film La Bella Rosa The film proved very successful Although her part in the film was small it led to many new opportunities for Alejandra Soon afterwards a music label offered Alejandra a contract to produce a CD album Unfamiliar with negotiation Alejandra needed an agent She found Gloria Woolrich a local Hispanic woman who worked with Spanish speaking performers Because Alejandra was not 18 years old yet her parents had to sign the contract on her behalf Gloria thought that Alejandra should target the Spanish speaking market in the US she promoted her as Lady Alejandra a name that emphasized her Hispanic origins with a touch of elegance Her first CD album Presentaci n Lady Alejandra included one song that reached number one in the music charts in Florida Even with only one top hit she earned much income from the copyrights and royalties from the CD album For the first time Alejandra needed an accountant to help her prepare her final accounts manage the money and pay the appropriate taxes Like most immigrant parents Mr and Mrs Carroccio strongly emphasized education When they first arrived in the US they struggled to satisfy even basic needs such as food and shelter only by working long hours did they achieve economic security They believed that if Alejandra went to university she would have a better life Although they celebrated her success with the CD album they did not want music to distract her from her studies Only with reluctance did her parents agree to a second CD album Viva Lady Alejandra which proved even more successful than the first one royalties payments made to the performer of the music and the songwriter by a third party such as a radio or television station each time the performer s music is played in the public domain

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3 45 50 55 60 65 70 75 80 85 M N15 3 BUSMT BP1 ENG TZ0 XX CS In April of her final year at high school Alejandra told her parents that she did not want to go to university she wanted instead to move to Los Angeles in order to build a career as a musician She wanted to be a star Her parents were very disappointed However because she was now 18 they could not stop her Alejandra left her previous agent Gloria Woolrich for a new one in Los Angeles Ruth Liebermann Ruth had successfully turned young stars into media sensations She would help Alejandra with everything buying an apartment in the most fashionable neighbourhood recruiting household employees getting agencies to establish concert tours producing more CD albums and more importantly promoting her Ruth explained to Alejandra that unless the product life cycle of music stars is carefully managed it is often short Alejandra needed a brand identity Her revenue streams would be based on that brand She would also develop strategies to extend the life of the product which was Alejandra herself Alejandra had an identity partly based upon her youthful and innocent look her powerful voice and her Hispanic heritage Ruth said that now that Alejandra was an adult she needed to dress more like a young woman and less like a child Nervous about this transition Alejandra agreed to a more glamorous image She began going to a famous hairdresser and style expert Gavin Pratt Soon she had another revenue stream appearing on the cover of high profile fashion magazines Ruth also argued that Alejandra needed to be less ethnic The US was rapidly changing demographically The percentage of the American population that was Hispanic was small but it was rapidly growing thus expanding the Spanish speaking American market However this demographic shift was creating a negative political reaction in the US Focus groups showed that some English speakers did not like the name Lady Alejandra Ruth recommended a new name just LadyA as one word pronounced lay dee ay with equally strong emphasis on the first and last syllables It worked By the year 2000 LadyA was one of the most successful musicians in the US Popular with English speakers especially teenage girls and young women she also appealed to many Hispanics Even though all her songs were now in English and were popular in the mainstream music charts Spanish speaking Americans were still fans They saw LadyA as a shining success story of a Hispanic American As LadyA grew more popular both her revenue and expenses increased By 2001 she was earning millions of dollars a year from CD album sales concerts magazine covers and music videos She employed a full time accountant to help manage her revenue and all the many expenses of her new life For her work she employed a band a group of dancers and a variety of musical and video technicians She asked Gavin to join her full time in order to plan all aspects of her clothing make up and hairstyle For her concerts she also had an events manager who arranged bookings of venues and hotels and who hired a company specializing in logistics who transported equipment and set up the stage at each concert location These were her core employees Temporary employees were needed at each venue to help set up the venue and stage She had many peripheral employees for her increasingly extravagant personal life two personal assistants two housekeepers one chef one personal trainer one driver and one chief bodyguard who supervised six bodyguards She was very inconsistent in her style of leadership with her employees Sometimes she was very direct giving detailed instructions and getting angry if they were not followed exactly At other times she adopted a more laissez faire leadership style The employees never knew what to expect Communication was poor Although working for a superstar had exciting moments the employees frequently complained behind her back mockingly calling her la princesa Turn over

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4 90 95 100 105 110 115 120 125 130 M N15 3 BUSMT BP1 ENG TZ0 XX CS Alejandra originally operated as a sole trader However as the business grew it became clear that she needed the protection of limited liability and so she changed the business to a private limited company LadyA Management Limited LAM Alejandra herself owned 98 of the shares in LAM Her parents and Ruth Liebermann owned the remaining 2 Technology was changing the music industry In 2000 online file sharing software became widely available Though the file sharing of copyrighted material was usually illegal many people did it anyway especially young people The sales of CD albums began to fall This trend continued with the emergence of other new technologies such as MP3 players and smartphones Another important technological change was video hosting websites which effectively ended the direct profitability of music videos Before video hosting websites musicians received royalties for videos that appeared on television Now artists such as LadyA had to produce their own videos and upload them to video hosting websites These productions were expensive but did not generate any direct revenue The definition of a successful musician was also changing With falling sales revenue from music a problem made worse by the economic downturn that began in 2008 artists had to transform themselves into media personalities and find ways to generate revenue from these branded identities just as Ruth had predicted In 2009 LadyA started appearing in many above the line and below the line promotions of various types of products LadyA was always very careful about which products she endorsed Each one had to strengthen her brand identity as a beautiful mainstream American yet one with Hispanic passion and intensity She also began communicating with her fans through various social networking websites In 2010 LadyA started offering her own product line of perfume and cosmetics promoted under the name LadyA Primary and secondary market research had showed that perfume and cosmetics would best connect with LadyA s established brand and help her reach her main target market teenage girls and young women The production of LadyA perfume and cosmetics was outsourced to an established manufacturer in Malaysia where costs were much lower Quality control could however be a problem The Malaysian manufacturer would produce LadyA perfume and cosmetics using batch production which would enable a variety of products to be made LadyA would have to pay 60 of the costs in advance The wholesaling and distribution was also outsourced to a company in Minnesota By 2011 LadyA perfume and cosmetics were sold in a nation wide chain of department stores in the US At the same time Alejandra decided to reorganize the business She continued to manage all of her household employees personally She appointed a Managing Director and a Human Resources Manager to assist in workforce planning and manage the rest of the business She delegated some business functions but kept a very close interest in all decisions through her meetings with the Managing Director One benefit of this reorganization was that with clear roles systems and procedures in place Alejandra s employees complained less On a personal level 2012 was a big year for Alejandra She married Rafaele Eco an Italian investment banker and they purchased a large mansion in Hollywood requiring an even greater number of peripheral employees Over the next few years LadyA was at the peak of her media power wealth and fame She was more mature and business oriented than when she was in her twenties Her leadership style had matured as well She became more consistent and paternalistic

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5 135 140 145 150 155 160 M N15 3 BUSMT BP1 ENG TZ0 XX CS Now she began to think about the next phase of her career and her life She was approaching her late thirties In the US many female musicians and film stars struggle to remain popular in their forties modelling jobs are harder to get girls and younger women typically prefer younger musicians and stars and the idea of selling youthfulness becomes more difficult as women grow older LadyA hired business consultants Kersey Joyce K J who specialized in the strategic direction of brands to help her consider her options K J identified three strategic options in their report to LadyA Option 1 Move into South American markets which generally accept older female musicians and film stars Ever since Lady Alejandra became LadyA she had focused on the English speaking market in the US Though she had some fans in Spanish speaking markets she had never made them a priority For those markets LadyA would start using the name Lady Alejandra again conduct a major concert tour in South America and try to repeat her North American career building an increasingly powerful name through music downloads such as MP3s concerts films product endorsements magazine covers and also perfume and cosmetics Option 2 Develop more products under the LadyA brand and develop a global market A possibility is a clothing range Other possible products include accessories such as LadyA shoes LadyA handbags and LadyA lingerie These products could be distributed in the US through the same department stores selling her perfume and cosmetics Other distribution channels would be required for the international market with e commerce offering many opportunities Family branding would be maintained Option 3 Re brand herself With this strategy LadyA would actually lower her media profile for three years During that time she would associate herself with a charitable cause to tackle issues such as malnutrition in developing countries homelessness in big cities or international trafficking of children She would use her wealth to set up various non profit organizations to support the charitable cause and utilize various techniques for marketing non profit organizations She would then appear on American television talk shows and do magazine interviews building a new brand identity based on the image of a strong mature determined and compassionate woman This would allow for new revenue streams to be sought based on this new brand Additional terms not in the guide Brand identity Core employees Limited liability Paternalistic Peripheral employees Revenue streams Companies products or individuals named in this case study are fictitious and any similarities with actual entities are purely coincidental

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2 M15 3 BUSMT HP1 ENG TZ0 XX Section A Answer two questions from this section 1 a b 2 Define the term mission statement line 11 2 ii Identify two fringe payments other than health insurance which Mrs Carroccio may have received from the school 2 Other than financial security explain one advantage and one disadvantage of Mr Carroccio operating as a sole trader line 5 4 c Analyse the relevance of Maslow s motivation theory to Alejandra 7 a Define the following terms b c 3 i a b c i quality control line 115 2 ii workforce planning line 122 2 Using information from lines 120 124 explain two possible relevant effects other than employees complained less of changing the organizational structure 4 Analyse two methods of market research that Alejandra could have used to help her establish her brand lines 111 112 7 Describe the relationship between opening balance and closing balance in a cash flow forecast line 7 4 Alejandra needed an accountant to help her prepare her final accounts lines 35 36 Explain the importance of final accounts to two different LadyA stakeholders 4 Analyse the usefulness to LadyA of the product life cycle model since 1994 7

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4 M15 3 BUSMT HP1 ENG TZ0 XX Section C Answer the compulsory question from this section 5 In the months after receiving the K J report Alejandra struggled with her decision over which option to choose The report had been highly scientific and gave her three strategic options However she intuitively felt that the strategic analysis had some problems The K J report was based on the assumptions that her next steps should be to extend her product life cycle and that her main objective should be growth growth of her brand growth of her business and growth of her profits She wondered if these assumptions were still appropriate She had recently read M Scott Peck s The Road Less Traveled which made her think about her life Item 1 She was experiencing a personal crisis Ever since she began modelling in Miami her career had gone from success to success but she now asked herself Have I ever really thought about my goals in life How do I want to be remembered She also realized that even though she had made her business more professional by forming LadyA Management Limited LAM she had never considered having a vision statement or a mission statement for herself After all she is the business At the same time that she was experiencing this personal crisis Alejandra and Rafaele received some exciting news she was having a baby They were delighted and Alejandra knew that her parents too would be very happy with the news She asked K J to examine how having a baby and motherhood could influence her strategic options Item 2 As Alejandra reconsidered her options she realized how important it was to her to be more than a singer dancer and performer She knew how fragile the career of a media personality could be In the United States US for example Martha Stewart had created a very powerful company Martha Stewart Living Omnimedia However in the last 10 years Martha Stewart had almost gone bankrupt Item 3 This story made Alejandra aware of the risks of trying to increase the scale of her business too quickly a Identify any two factors other than technology that caused LadyA s objectives to change 2 Using information from Item 2 calculate the predicted outcomes x and y of strategic Options 1 and 2 show all your working 4 c Explain any one of Porter s five forces that have had an impact on LadyA 3 d Examine two driving and two restraining forces that have influenced changes at LadyA Management Limited LAM 9 b e Using your answers to part b information contained in the case study and Items 1 to 3 discuss LadyA s three strategic options now that Alejandra is having a baby Additional information is on the following pages 12

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5 M15 3 BUSMT HP1 ENG TZ0 XX Additional information Item 1 Extract from M Scott Peck The Road Less Traveled 1978 To proceed very far through the desert you must be willing to meet existential suffering and work it through In order to do this the attitude toward pain has to change This happens when we accept the fact that everything that happens to us has been designed for our spiritual growth Item 2 Memo from K J examining how having a baby and motherhood could influence LadyA s strategic options To From LadyA K J After reviewing all three options and considering that you are having a baby we believe all three options remain feasible In each case the fact that you will soon be a mother may add value However you must consider the following issues Option 1 This would require either that your baby travels with you or that you are prepared for extended periods of time when you and your baby will be apart while you work in South America Option 2 You could delegate far more to the Managing Director who would manage the development of a global market and the new distribution channels You may have less time for the regular meetings with the Managing Director or to keep such a close interest in all the decisions Option 3 This would require your willingness to include your baby as part of your media profile In many ways this option suits the fact that you are having a baby Becoming a mother may strengthen your attempts to re brand yourself However from the beginning K J has considered re branding as the riskiest option We predict that the chances of success and potential profits from the three options are as follows figures are given in millions of If successful Option 1 10m per year for Chance of success 90 five years Cost 10m Option 2 40m per year for Chance of success 75 five years Cost 25m Option 3 Zero profits for three Chance of success 50 years 15m in year Cost 5m 4 and 20m in year 5 If unsuccessful 0 5m per year for five years Predicted outcome x 10m per year for five years y Zero profits for three years 2m per year in year 4 and year 5 14 5m Additional information continues on the following page Turn over

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6 M15 3 BUSMT HP1 ENG TZ0 XX Additional information continued Item 3 Extract adapted from USA Today 12 December 2013 on Martha Stewart Living Omnimedia Martha Stewart Living Omnimedia the media company that owns the Martha Stewart Living magazine and other digital and television ventures branded with the founder s name will make about 100 employees redundant next Thursday according to the New York Post The number of jobs eliminated amounts to about a quarter of its workforce the Post report said In its most recent annual report earlier this year the company said it had about 497 employees as of February The downsizing comes about a month after the company named Daniel Dienst as its new Chief Executive Officer CEO In an October statement announcing his appointment Stewart who founded the company and serves as non executive chairman said Dienst was appointed to the job partly due to his strong operating and financial discipline

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3 M15 3 BUSMT HP1 ENG TZ0 XX M The markbands on pages 3 6 should be used where indicated in the markscheme Section A Q1 c Q2 c Q3 c Level descriptors Marks 0 7 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the case study 3 5 A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the case study not just to the name of the organization At the lower end of the markband responses are mainly theoretical 6 7 A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the case study

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4 M15 3 BUSMT HP1 ENG TZ0 XX M Section B Q4 d Level descriptors Marks 0 8 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the case study 3 4 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the case study not just to the name of the organization The response is mainly theoretical 5 6 7 8 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the case study are made at places in the response A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the case study are made throughout the response

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5 M15 3 BUSMT HP1 ENG TZ0 XX M Section C Q5 d Level descriptors Marks 0 9 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 3 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the case study and or the extension material within Section C 4 6 A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the case study and or the extension material within Section C not just to the name of the organization At the lower end of the markband responses are mainly theoretical 7 9 A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the case study and or the extension material within Section C

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6 M15 3 BUSMT HP1 ENG TZ0 XX M Section C Q5 e Level descriptors Marks 0 12 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 3 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of synthesis of information from the case study the extension material in Section C and where applicable from other responses within Section C Information is merely lifted and copied into the response No evidence of judgments and or conclusions No reference is made to the information in the case study and the extension material within Section C 4 6 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of synthesis of information from the case study the extension material in Section C and where applicable from other responses within Section C Information is merely lifted and copied into the response Evidence of judgments and or conclusions that are no more than unsubstantiated statements Limited reference is made to the information in the case study and the extension material within Section C The response is mainly theoretical 7 9 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology At places in the response information from the case study the extension material in Section C and where applicable from other responses within Section C is synthesized and integrated to provide a basis for analysis and evaluation A response that includes judgments and or conclusions that have limited support and are underpinned by a balanced analysis Explicit references to the information in the case study and the extension material within Section C are made at places in the response 10 12 A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response Information from the case study the extension material in Section C and where applicable from other responses within Section C is proficiently synthesized and integrated to provide a basis for analysis and evaluation A response that includes judgments and or conclusions that is well supported and underpinned by a thorough and balanced analysis Explicit references to the information in the case study and the extension material within Section C are made throughout the response

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7 M15 3 BUSMT HP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section A 1 a i Define the term mission statement line 11 2 A mission statement is a statement of a business s core value aim and it is phrased in a way that will motivate the employees and attract the interest of external stakeholders N B disregard reference to short term long term and allow descriptions which are more appropriate to vision statement Candidates are not expected to word their definition exactly as above Award 1 for a basic definition that conveys partial knowledge and understanding Such as mission statement is a statement of a business s core value aim Award 2 for a full clear definition that conveys knowledge and understanding similar to the answer above ii Identify two fringe payments other than health insurance which Mrs Carroccio may have received from the school Fringe payments which Mrs Carroccio may have received include meal packages lunch vouchers coupons free meal or discounted meal which is very likely as she works in the cafeteria free uniform free transportation use of school bus discounted bus pass and similar wording childcare free English classes further higher education classes for herself in a local college maternity leave school fees for young Alejandra etc It is not possible to write an exhaustive list of acceptable answers examiners will have to use their professional judgment However do not accept Dental insurance dental plan too similar to health insurance Unrealistic examples company car free accommodation laptop mobile phone as Mrs Carroccio has a low paid job in the cafeteria it is unlikely that she is offered free accommodation on the school grounds unlike the school director the example has to be plausible in the context of the case study Vague answers discounts for family members which is too vague and should be further contextualized access to school facilities which is also too vague however accept free membership of school gym or free access to the school swimming pool paid vacation does this mean a paid vacation package Cash benefits overtime bonuses share ownership scheme Training which is in the case study she received training and some fringe payments line 13 the question is designed to assess candidates knowledge and understanding of what fringe payments may be 2

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8 M15 3 BUSMT HP1 ENG TZ0 XX M Repetitive answers for free food for herself and for family members award 1 not 2 It is not possible to write an exhaustive list of non acceptable answers examiners will have to use their professional judgment In some ambiguous cases examiners may want to give BOD or NBOD Award 1 for each relevant and correct fringe payment non cash benefit identified for Mrs Carroccio award up to a maximum of 2 b Other than financial security explain one advantage and one disadvantage of Mr Carroccio operating as a sole trader line 5 Advantages for Mr Carroccio of operating as a sole trader could include Total ownership and control of his business where he is his own boss not requiring to consult with others before making decisions or share the profits Simplest form of organization with fewer legal restrictions for setting up the business Freedom to choose his own holidays hours of work prices to be charged who to employ etc Accept any other relevant advantage applied to in context of Mr Carroccio Disadvantages for Mr Carroccio of operating as a sole trader could include Unlimited liability a sole trader s business is not considered as a separate legal unit and therefore his personal possessions are at stake if the business cannot pay its debts Limited capital resources for set up internal growth and for spending in general Must largely rely on his own savings and resources banks are often reluctant to loan to these businesses Mr Carroccio being turned down several times for bank loans see line 8 Limited pool of ideas and limited experience Must bear the financial risks of the business and all losses on his own Sole refers to the fact that the entrepreneur is the only owner without business partners though they may employ other people There is no continuity of the business after the death of the owner Accept any other relevant disadvantage applied to in context of Mr Carroccio N B context of Mr Carroccio is likely to come from limited finance being new to the country bank loan refused and desire to work independently If the disadvantage is unlimited liability award 2 when there is a good explanation Mark as 2 2 Award 1 for each correct and relevant advantage disadvantage identified and 1 for an appropriate explanation showing why it is an advantage disadvantage Award up to a maximum of 2 for each advantage disadvantage 4

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9 c M15 3 BUSMT HP1 ENG TZ0 XX M Analyse the relevance of Maslow s motivation theory to Alejandra Maslow s Pyramid Source Clark P et al 2009 Business and Management Course Companion page 125 Glasgow U K Oxford University Press As young Alejandra approached eighteen she may have experienced higher order needs self esteem needs recognition status She had several sources of income from CD album sales concerts magazine covers and music videos physiological and safety needs were met Belonging needs may have been met through her popularity with fans One of the future strategic options suggested by K J could probably allow Alejandra to meet self actualization needs These would also generate new streams of revenue for Alejandra Candidates could be rewarded for answering how Alejandra could use Maslow to motivate her employees Accept any other relevant application analysis N B candidates are not expected to draw the model itself If there is only development analysis of one level of Maslow award a maximum of 4 For answers with no effective use of the case study award a maximum of 3 Marks should be allocated according to the markbands on page 3 7

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10 2 a M15 3 BUSMT HP1 ENG TZ0 XX M Define the following terms i quality control line 115 2 Quality control refers to systems in place at a business to check whether that level of quality has been achieved It can involve sampling inspection and checking of quality It is usually carried out on the product service rather than the process itself 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 similar to the answer above ii workforce planning line 122 Workforce planning refers to the forecast of future human resources especially in terms of recruitment and training It normally involves assessing the current workforce and identifying future needs for new skills or knowledge in order to help the organization meet its strategic objectives 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 similar to the answer above Award a maximum of 1 if the answer is only about matching employees to jobs 2

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11 b M15 3 BUSMT HP1 ENG TZ0 XX M Using information from lines 120 124 explain two possible relevant effects other than employees complained less of changing the organizational structure Possible effects of changing the organizational structure Better decisions for the business can be made as the Managing Director and Human Resources Manager are specialized in their roles Less employees to manage allows Alejandra time to concentrate on the work that she is involved with and hence carry out her work better Delegating some business functions could make employees staff feel empowered and hence more motivated Alejandra could feel less in control as she is not managing the majority of staff herself Mark as 2 2 Award 1 for each appropriate effect identified and 1 for an appropriate explanation in context of the case study Award up to 2 for each effect Context is likely to come from raising issues such as previous poor communication change to limited company change of leadership style creation of new roles such as Human Resources Manager 4

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12 c M15 3 BUSMT HP1 ENG TZ0 XX M Analyse two methods of market research that Alejandra could have used to help her establish her brand lines 111 112 Market research is the process of systematically gathering recording and analysing data about customers competitors and the market With market research Ruth Liebermann through focus groups a primary market research method learnt that some English speakers in the US did not like the name Lady Alejandra and were unable to make an association with it therefore Ruth suggested adopting the new name LadyA The purpose of market research was to help Ruth make better business decisions about the development and marketing of new products Market research represents the voice of the target market A list of questions can be answered through market research Primary market research methods first hand and gathered for a specific purpose could include Questionnaires surveys these may include closed or open ended questions For example do you subscribe to magazines which ones What type of music would you like Questions may be both qualitative as well as quantitative Gathering opinion in order to design and modify products LadyA and the merchandise to meet preferences Observation observers watch consumers in stores how readily they notice the CD albums displayed which magazines they buy how much time they take in making spending decisions Focus groups a group of customers brought together to form a panel to discuss and answer questions prepared by market researchers example above Secondary market research methods desk research secondhand data gathered for a different purpose could include Government data eg census US demographics and the shift expanding Spanish speaking American market English speakers Hispanics number of teenage girls and women in the population Growth rates income trends Company data past records eg accounts sales data The media Internet Trade organizations Competitor data records eg sales data Allow methods to be interpreted as questionnaires focus groups and so on The two do not have to be related to primary secondary The relationship to brand could come from exploring customers and their perceptions Accept any relevant analysis N B do not credit sampling or sampling methods If the answer does not refer to the case study award a maximum of 3 If there is no reference to brands award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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13 3 a M15 3 BUSMT HP1 ENG TZ0 XX M Describe the relationship between opening balance and closing balance in a cash flow forecast line 7 4 The opening balance is the cash in a business at the beginning of a time period The closing balance is the cash in a business at the end of a time period Closing balance opening balance forecast cash in forecast cash out The closing balance for one time period is the opening balance for the next time period N B no need to refer to the formula to show full understanding Award 1 for each valid element of the answer up to a maximum of 4 b Alejandra needed an accountant to help her prepare her final accounts lines 35 36 Explain the importance of final accounts to two different LadyA stakeholders For owner LadyA to determine the level of profit made from various streams sources to determine the most profitable sources and the weaker ones To determine her total net worth net assets Government for taxation purposes net profit before interest and tax Malaysian manufacturer perfumes and cosmetics would be interested in the liquidity ratios LadyA s ability to pay the 40 balance Employees LadyA s ability to pay the wages working conditions fringe benefits Managers to maintain and control costs within budgets Fans customers little or no usefulness Accept any other relevant stakeholder and explanation Mark as 2 2 Award 2 for theory of what are final accounts stakeholders and 2 for application of final accounts to two different but relevant stakeholders Award a maximum of 4 4

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14 c M15 3 BUSMT HP1 ENG TZ0 XX M Analyse the usefulness to LadyA of the product life cycle model since 1994 Introduction 1994 Growth 2000 2011 Maturity Peak 2012 Decline 1994 Introduction of Lady Alejandra in the film La Bella Rosa introduction phase 2000 one of the most successful musicians in the US 2001 millions of dollars earned through CD album sales concerts magazine covers and music videos 2009 engaged in promotion endorsements 2010 her own product line of perfumes and cosmetics Approximately the years from 2000 can be shown as growth phase 2012 was the peak maturity phase of her media power wealth and fame began planning for extension strategies through K J in order to prevent the decline phase Knowing the stages of the product life cycle can help a business plan the appropriate marketing mix and the right marketing strategies It helps identify how cash flow may depend on the product life cycle which will be at its highest peak in 2012 LadyA s business may also experience economies of scale It can identify the need for extension strategies adopted by a business to prevent sales from falling in order to push sales further it intends to prolong the maturity phase of the product life cycle For example K J were hired to identify extension strategies Disadvantages include not always reliable do not know where you are good concept but poor in practice Accept any other relevant application N B candidates are not expected to draw the diagram nor write about the events chronologically as above For answers without effective use of the case study award a maximum of 3 If the answer lacks balance award a maximum of 5 7

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16 M15 3 BUSMT HP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section B 4 a Describe two benefits for LadyA of outsourcing the production of perfume and cosmetics to Malaysia lines 113 114 4 The possible benefits could include cheaper wages other lower costs established producer batch production allows greater variety she could focus on core competencies Accept any other relevant benefit with a description Mark as 2 2 Award 1 for identifying a relevant benefit award an additional 1 for the description that refers to the Malaysian situation for example lower wages BOD Award up to a maximum of 2 per benefit b Explain how expensive internet videos that did not generate any direct revenue line 101 contributed to LadyA s marketing mix It is an example of a loss leader With the advent of social media and other technological developments it became impossible to generate so much revenue from sales of CD albums and associated videos The marketing attention switched to transforming singers such as Alejandra into media personalities Revenue was then generated by for example endorsing products selling her own products concert tours and so on Each of these needed the focus to be on a presence for the brand Such a focus could be enhanced through high profile exposure through social media sites Directly it cost a lot to produce the internet videos but the publicity and exposure generated could create indirectly even more revenue Accept any other relevant explanation Award 1 for a basic answer that shows some knowledge of the concept of marketing promotion loss leaders for example an answer that lacks clarity or shows some confusion Award 2 for an answer which shows knowledge and understanding of marketing promotion loss leaders however with no useful reference to LadyA Award 3 for an answer which clearly explains the concept of promotion through non revenue generating activities with limited effective application to LadyA Award 4 for an answer which clearly explains how non revenue internet videos can aid LadyA s marketing If the response is not related to LadyA Alejandra award a maximum of 2 4

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17 c M15 3 BUSMT HP1 ENG TZ0 XX M Explain the role of branding for LadyA in a global market Branding is the marketing practice of creating a name symbol or design that identifies and differentiates a product in the mind of the customer For LadyA the product is entirely about the name and Alejandra s talents Her market is worldwide So the product is also the brand The brand also applies to a range of products all under the same name so it is family branding The role is to keep her fans happy informing them of developments and creating new fans sales It is also about giving a high profile to the various merchandise and planned merchandise In a global market the brand has to appeal to people of different cultures language fashions and this could be difficult Accept any other relevant explanation Award up to 2 for an understanding of the role of branding global markets Award an additional 2 for application of the concepts to LadyA Award up to a maximum of 4 If there is no reference to global market award a maximum of 3 4

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18 d M15 3 BUSMT HP1 ENG TZ0 XX M Discuss whether the effectiveness of Alejandra s leadership style is the result of natural skills and abilities or a consequence of the circumstances she faced To begin with she was very autocratic and other times adopted a laissez faire style At this time she showed great inconsistencies As she matured she softened her leadership style becoming more consistent and paternalistic perhaps learning new skills as she went on Skills and abilities In terms of her natural skills and abilities Alexandra is a performer and there is some evidence that she has a high opinion of herself She is clearly highly talented and driven To an extent this explains her autocratic nature Also performers are often known for having a somewhat erratic creative side to their character which might explain her inconsistencies Skills changed over her life Circumstances In part the change was brought about following a re organization in which a Managing Director and a Human Resources Manager took on a lot of the responsibilities This was related to incorporation of the business However personal circumstances too changed as she got older and as she married So as she matured so did her leadership style In later life however it seems to be more her circumstances driving her leadership more content through success and marriage and more mature through passing years Accept any other relevant response It does not matter what conclusions candidates reach at the end of their discussion ie whether they conclude it is skills abilities or circumstances driving the leadership style however for the highest markband there has to be an overall balanced conclusion If a response is purely theoretical award a maximum of 4 If the response is a one sided discussion that only looks at natural skills and abilities or circumstances faced award a maximum of 5 If there is no balanced conclusion award a maximum of 6 Marks should be allocated according to the markbands on page 4 8

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19 M15 3 BUSMT HP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section C 5 a Identify any two factors other than technology that caused LadyA s objectives to change 2 Factors that caused LadyA s objectives to change could include ageing eg Alejandra reaching maturity fashion new markets eg Hispanics growth needed objectives relating to organization structures having a baby changing ownership to limited liability personal crisis reading The Road Less Traveled Item 1 accept any other relevant factor Award 1 for each relevant factor identified up to a maximum of 2 b Using information from Item 2 calculate the predicted outcomes x and y of strategic Options 1 and 2 show all your working 4 Option 1 Predicted outcome 0 90 50 0 10 2 5 10 45 0 25 10 35 25m Option 2 Predicted outcome 0 75 200 0 25 50 25 150 12 5 25 112 5m Mark as 2 2 N B do not penalize for omission of m If there is an attempt made at using correct numbers award 1 Award 1 for working and 1 for the correct answer Award a maximum of 2 c Explain any one of Porter s five forces that have had an impact on LadyA Porter s five forces could include new market entrants younger new female musicians threat of substitutes technology fashion trends MP3s social media supplier power new markets to be exploited competitive rivalry differentiation buyer power may not be relevant Accept any one of Porter s five forces with a relevant explanation Award 1 for demonstrating an understanding of one of Porter s five forces Award 2 for a partial explanation of one force with reference to LadyA Award 3 for an explanation of one force with reference to LadyA 3

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20 d M15 3 BUSMT HP1 ENG TZ0 XX M Examine two driving and two restraining forces that have influenced changes at LadyA Management Limited LAM 9 Driving forces include Alejandra s ambition success ageing population changes parents ambitions accept any other relevant driving force Restraining forces employees attitudes Alejandra s early fear of change English speakers attitude to Spanish possibility of endorsing poor products accept any other relevant restraining force Accept any relevant examination of the driving and restraining forces identified N B some issues for example pregnancy can be classified as either a driving or a restraining force Each force identified should be analysed to show the influence that it has had on the development of LadyA LAM For an answer that identifies relevant forces but with limited development award a maximum of 4 For an answer that is limited to either driving forces or restraining forces award a maximum of 5 For a response that makes no attempt to balance driving and restraining forces award a maximum of 6 For a theoretical response award a maximum of 4 Marks should be allocated according to the markbands on page 5 e Using your answers to part b information contained in the case study and Items 1 to 3 discuss LadyA s three strategic options now that Alejandra is having a baby It should be recognized that given time constraints answers are likely to include a much narrower range of issues and concepts than identified below There is no correct answer Examiners must be prepared to award high marks to answers which synthesize and evaluate even if they do not use all the stimulus materials Option 1 Move into South American markets Existing product new market medium risk high probability of success Middling EV some return from failure Big market New market for CD albums films etc Baby creates complications How much does she want to be with baby What changes needed to the product Is this the right thing to do at her age Fragile career What impact would a baby have on her image 12

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21 M15 3 BUSMT HP1 ENG TZ0 XX M How would the US market react Outcome of decision tree How realistic are assumptions Martha Stewart experience relevant Option 2 Develop more products under the LadyA brand and develop a global market Product development and new markets high risk But high returns if EV to be trusted Failure means a loss and it is a fair chance 25 that will happen Massive new market huge and rapid growth New distribution channels needed for international market How difficult US market would continue to form a good base Expertise for e commerce What about e commerce for Option 1 Outcome of decision tree How realistic are assumptions Martha Stewart experience relevant Option 3 Re brand herself Very high risk but smallest of returns if EV to be trusted Probabilities only 50 50 Loss of revenue for significant period Fits in with pregnancy motherhood Would it work Would fans think of it as cynical What would happen to her employees and other infrastructure Outcome of decision tree How realistic are assumptions Fits in with notions of spiritual growth and pain in change M Scott Peck How important is self esteem actualization to Alejandra Accept any relevant discussion of any relevant points It does not matter which way the candidate argues N B a recommendation is not necessary but there needs to be balanced judgments in the arguments to achieve the highest marks If the answer refers to fewer than three options award a maximum of 7 If the answer does not use Items 1 2 or 3 award a maximum of 5 For an unbalanced answer award a maximum of 9 Each option is discussed but not compared with each other award a maximum of 8 Marks should be allocated according to the markbands on page 6

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2 M15 3 BUSMT SP1 ENG TZ0 XX Section A Answer two questions from this section 1 a b 2 Define the term mission statement line 11 2 ii Identify two fringe payments other than health insurance which Mrs Carroccio may have received from the school 2 Other than financial security explain one advantage and one disadvantage of Mr Carroccio operating as a sole trader line 5 4 c Analyse the relevance of Maslow s motivation theory to Alejandra 7 a Define the following terms b c 3 i a b c i quality control line 115 2 ii workforce planning line 122 2 Using information from lines 120 124 explain two possible relevant effects other than employees complained less of changing the organizational structure 4 Analyse two methods of market research that Alejandra could have used to help her establish her brand lines 111 112 7 Describe the relationship between opening balance and closing balance in a cash flow forecast line 7 4 Alejandra needed an accountant to help her prepare her final accounts lines 35 36 Explain the importance of final accounts to two different LadyA stakeholders 4 Analyse the usefulness to LadyA of the product life cycle model since 1994 7

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3 M15 3 BUSMT SP1 ENG TZ0 XX M The markbands on pages 3 4 should be used where indicated in the markscheme Section A Q1 c Q2 c Q3 c Level descriptors Marks 0 7 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the case study 3 5 A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the case study not just to the name of the organization At the lower end of the markband responses are mainly theoretical 6 7 A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the case study

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4 M15 3 BUSMT SP1 ENG TZ0 XX M Section B Q4 c Level descriptors Marks 0 8 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the case study 3 4 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the case study not just to the name of the organization The response is mainly theoretical 5 6 7 8 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the case study are made at places in the response A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the case study are made throughout the response

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5 M15 3 BUSMT SP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section A 1 a i Define the term mission statement line 11 2 A mission statement is a statement of a business s core value aim and it is phrased in a way that will motivate the employees and attract the interest of external stakeholders N B disregard reference to short term long term and allow descriptions which are more appropriate to vision statement Candidates are not expected to word their definition exactly as above Award 1 for a basic definition that conveys partial knowledge and understanding Such as mission statement is a statement of a business s core value aim Award 2 for a full clear definition that conveys knowledge and understanding similar to the answer above ii Identify two fringe payments other than health insurance which Mrs Carroccio may have received from the school Fringe payments which Mrs Carroccio may have received include meal packages lunch vouchers coupons free meal or discounted meal which is very likely as she works in the cafeteria free uniform free transportation use of school bus discounted bus pass and similar wording childcare free English classes further higher education classes for herself in a local college maternity leave school fees for young Alejandra etc It is not possible to write an exhaustive list of acceptable answers examiners will have to use their professional judgment However do not accept Dental insurance dental plan too similar to health insurance Unrealistic examples company car free accommodation laptop mobile phone as Mrs Carroccio has a low paid job in the cafeteria it is unlikely that she is offered free accommodation on the school grounds unlike the school director the example has to be plausible in the context of the case study Vague answers discounts for family members which is too vague and should be further contextualized access to school facilities which is also too vague however accept free membership of school gym or free access to the school swimming pool paid vacation does this mean a paid vacation package Cash benefits overtime bonuses share ownership scheme Training which is in the case study she received training and some fringe payments line 13 the question is designed to assess candidates knowledge and understanding of what fringe payments may be 2

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6 M15 3 BUSMT SP1 ENG TZ0 XX M Repetitive answers for free food for herself and for family members award 1 not 2 It is not possible to write an exhaustive list of non acceptable answers examiners will have to use their professional judgment In some ambiguous cases examiners may want to give BOD or NBOD Award 1 for each relevant and correct fringe payment non cash benefit identified for Mrs Carroccio award up to a maximum of 2 b Other than financial security explain one advantage and one disadvantage of Mr Carroccio operating as a sole trader line 5 Advantages for Mr Carroccio of operating as a sole trader could include Total ownership and control of his business where he is his own boss not requiring to consult with others before making decisions or share the profits Simplest form of organization with fewer legal restrictions for setting up the business Freedom to choose his own holidays hours of work prices to be charged who to employ etc Accept any other relevant advantage applied to in context of Mr Carroccio Disadvantages for Mr Carroccio of operating as a sole trader could include Unlimited liability a sole trader s business is not considered as a separate legal unit and therefore his personal possessions are at stake if the business cannot pay its debts Limited capital resources for set up internal growth and for spending in general Must largely rely on his own savings and resources banks are often reluctant to loan to these businesses Mr Carroccio being turned down several times for bank loans see line 8 Limited pool of ideas and limited experience Must bear the financial risks of the business and all losses on his own Sole refers to the fact that the entrepreneur is the only owner without business partners though they may employ other people There is no continuity of the business after the death of the owner Accept any other relevant disadvantage applied to in context of Mr Carroccio N B context of Mr Carroccio is likely to come from limited finance being new to the country bank loan refused and desire to work independently If the disadvantage is unlimited liability award 2 when there is a good explanation Mark as 2 2 Award 1 for each correct and relevant advantage disadvantage identified and 1 for an appropriate explanation showing why it is an advantage disadvantage Award up to a maximum of 2 for each advantage disadvantage 4

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7 c M15 3 BUSMT SP1 ENG TZ0 XX M Analyse the relevance of Maslow s motivation theory to Alejandra Maslow s Pyramid Source Clark P et al 2009 Business and Management Course Companion page 125 Glasgow U K Oxford University Press As young Alejandra approached eighteen she may have experienced higher order needs self esteem needs recognition status She had several sources of income from CD album sales concerts magazine covers and music videos physiological and safety needs were met Belonging needs may have been met through her popularity with fans One of the future strategic options suggested by K J could probably allow Alejandra to meet self actualization needs These would also generate new streams of revenue for Alejandra Candidates could be rewarded for answering how Alejandra could use Maslow to motivate her employees Accept any other relevant application analysis N B Candidates are not expected to draw the model itself If there is only development analysis of one level of Maslow award a maximum of 4 For answers with no effective use of the case study award a maximum of 3 Marks should be allocated according to the markbands on page 3 7

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8 2 a M15 3 BUSMT SP1 ENG TZ0 XX M Define the following terms i quality control line 115 2 Quality control refers to systems in place at a business to check whether that level of quality has been achieved It can involve sampling inspection and checking of quality It is usually carried out on the product service rather than the process itself 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 similar to the answer above ii workforce planning line 122 Workforce planning refers to the forecast of future human resources especially in terms of recruitment and training It normally involves assessing the current workforce and identifying future needs for new skills or knowledge in order to help the organization meet its strategic objectives 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 similar to the answer above Award a maximum of 1 if the answer is only about matching employees to jobs 2

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9 b M15 3 BUSMT SP1 ENG TZ0 XX M Using information from lines 120 124 explain two possible relevant effects other than employees complained less of changing the organizational structure Possible effects of changing the organizational structure Better decisions for the business can be made as the Managing Director and Human Resources Manager are specialized in their roles Less employees to manage allows Alejandra time to concentrate on the work that she is involved with and hence carry out her work better Delegating some business functions could make employees staff feel empowered and hence more motivated Alejandra could feel less in control as she is not managing the majority of staff herself Mark as 2 2 Award 1 for each appropriate effect identified and 1 for an appropriate explanation in context of the case study Award up to 2 for each effect Context is likely to come from raising issues such as previous poor communication change to limited company change of leadership style creation of new roles such as Human Resources Manager 4

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10 c M15 3 BUSMT SP1 ENG TZ0 XX M Analyse two methods of market research that Alejandra could have used to help her establish her brand lines 111 112 Market research is the process of systematically gathering recording and analysing data about customers competitors and the market With market research Ruth Liebermann through focus groups a primary market research method learnt that some English speakers in the US did not like the name Lady Alejandra and were unable to make an association with it therefore Ruth suggested adopting the new name LadyA The purpose of market research was to help Ruth make better business decisions about the development and marketing of new products Market research represents the voice of the target market A list of questions can be answered through market research Primary market research methods first hand and gathered for a specific purpose could include Questionnaires surveys these may include closed or open ended questions For example do you subscribe to magazines which ones What type of music do you like Questions may be both qualitative as well as quantitative Gathering opinion in order to design and modify products LadyA and the merchandise to meet preferences Observation observers watch consumers in stores how readily they notice the CD albums displayed which magazines they buy how much time they take in making spending decisions Focus groups a group of customers brought together to form a panel to discuss and answer questions prepared by market researchers example above Secondary market research methods desk research secondhand data gathered for a different purpose could include Government data eg census US demographics and the shift expanding Spanish speaking American market English speakers Hispanics number of teenage girls and women in the population Growth rates income trends Company data past records eg accounts sales data The media Internet Trade organizations Competitor data records eg sales data N B allow methods to be interpreted as questionnaires focus groups and so on The two do not have to be related to primary secondary The relationship to brand could come from exploring customers and their perceptions Accept any relevant analysis N B do not credit sampling or sampling methods If the answer does not refer to the case study award a maximum of 3 If there is no reference to brands award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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11 3 a M15 3 BUSMT SP1 ENG TZ0 XX M Describe the relationship between opening balance and closing balance in a cash flow forecast line 7 4 The opening balance is the cash in a business at the beginning of a time period The closing balance is the cash in a business at the end of a time period Closing balance opening balance forecast cash in forecast cash out The closing balance for one time period is the opening balance for the next time period N B no need to refer to the formula to show full understanding Award 1 for each valid element of the answer up to a maximum of 4 b Alejandra needed an accountant to help her prepare her final accounts lines 35 36 Explain the importance of final accounts to two different LadyA stakeholders For owner LadyA to determine the level of profit made from various streams sources to determine the most profitable sources and the weaker ones To determine her total net worth net assets Government for taxation purposes net profit before interest and tax Malaysian manufacturer perfumes and cosmetics would be interested in the liquidity ratios LadyA s ability to pay the 40 balance Employees LadyA s ability to pay the wages working conditions fringe benefits Managers to maintain and control costs within budgets Fans customers little or no usefulness Accept any other relevant stakeholder and explanation Mark as 2 2 Award 2 for theory of what are final accounts stakeholders and 2 for application of final accounts to two different but relevant stakeholders Award a maximum of 4 4

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12 c M15 3 BUSMT SP1 ENG TZ0 XX M Analyse the usefulness to LadyA of the product life cycle model since 1994 Introduction 1994 Growth 2000 2011 Maturity Peak 2012 Decline 1994 Introduction of Lady Alejandra in the film La Bella Rosa introduction phase 2000 one of the most successful musicians in the US 2001 millions of dollars earned through CD album sales concerts magazine covers and music videos 2009 engaged in promotion endorsements 2010 her own product line of perfumes and cosmetics Approximately the years from 2000 can be shown as growth phase 2012 was the peak maturity phase of her media power wealth and fame began planning for extension strategies through K J in order to prevent the decline phase Knowing the stages of the product life cycle can help a business plan the appropriate marketing mix and the right marketing strategies It helps identify how cash flow may depend on the product life cycle which will be at its highest peak in 2012 LadyA s business may also experience economies of scale It can identify the need for extension strategies adopted by a business to prevent sales from falling in order to push sales further it intends to prolong the maturity phase of the product life cycle For example K J were hired to identify extension strategies Disadvantages include not always reliable do not know where you are good concept but poor in practice Accept any other relevant application N B candidates are not expected to draw the diagram nor write about the events chronologically as above For answers without effective use of the case study award a maximum of 3 If the answer lacks balance award a maximum of 5 7

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14 M15 3 BUSMT SP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section B 4 a Describe one strength and one weakness of K J s Option 3 lines 153 161 4 Possible strengths could include LadyA associating herself with a charitable cause to tackle issues such as malnutrition in developing countries homelessness in big cities or international trafficking of children demonstrating social responsibility to society Using her personal wealth to set up non profit organizations to support the above causes demonstrating responsibility to society by paying back to them for specific causes to humanity Build new brand identity by appearing on American television talk shows and magazine interviews an image of a strong mature determined and compassionate woman building a new image a new product life cycle or extension Possible weaknesses could include Lowering media profile for three years may prove difficult in the media world out of sight out of mind of the target market new competitors may develop Seeking new revenue streams based on the new brand identity the outcomes of which are unknown N B some candidates may identify the use of personal wealth to set up non profit organizations as a weakness of this option and thus this can be credited Do not credit external factors such as the opportunity or the threat coming from the external environment the strengths and weaknesses must be internal and must refer to K J s Option 3 Mark as 2 2 Award 1 for a correct strength weakness identified and 1 for a relevant description in context Award up to a maximum of 2 b Using the additional information below for a LadyA concert i calculate the break even quantity in units show all your working Fixed costs 2750000 2750000 11000 units Accept 11 000 Contribution 300 50 250 Award 1 if the candidate has shown working provides a correct procedure thus demonstrates an understanding of the underlying concepts but has made an error in calculation Award 2 if the candidate provides the correct answer with working 2

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15 ii M15 3 BUSMT SP1 ENG TZ0 XX M calculate the profit if 15 000 tickets are sold 1 Total revenue Total costs 15000 300 2 750 000 15000 50 4500 000 2 750 000 750 000 4500 000 3500 000 1000 000 Award 1 for the correct answer no working required iii construct to scale a fully labelled break even chart N B allow candidate own figure rule OFR from calculations made in previous question parts Award marks as follows 1 for each appropriately labelled axis up to a maximum of 2 1 for an appropriately drawn and labelled total revenue curve 1 for an appropriately 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 3 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 break even point a vertical line from the x axis to the break even point provided that the line is labelled break even point 5

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16 c M15 3 BUSMT SP1 ENG TZ0 XX M LadyA has rejected Option 3 lines 153 161 Recommend whether LadyA should choose Option 1 lines 139 146 or Option 2 lines 147 152 Option 1 Move into South American markets Possible advantages include Some fans in Spanish speaking markets South American markets generally accept older female musicians and film stars also Lady Alejandra has an Hispanic background which could help her fit well with the target market as from their own Possible disadvantages include Fans in English speaking target market may be lost this will also affect product sales the perfumes and cosmetics they may also see a decline with the English speaking target markets Any future re entry into the English speaking target market may be difficult Huge costs not known to be incurred in re establishing a new brand altogether entering an untested market with a major concert tour and rebuilding the brand name Lady Alejandra through sale of music films product endorsements magazine covers perfume and cosmetics etc Option 2 Develop more products Possible advantages include Further exploitation of the already established brand name to develop more products LadyA shoes LadyA handbags and LadyA lingerie Uses the already established distribution network in the US for perfumes and cosmetics for the new products Economies of scale may be experienced Develops a global market while some products work well in some markets others will work in other markets Opportunities for e commerce within US and worldwide Possible disadvantages include New producers will have to be sought design product quality details and other arrangements worked out more management logistics etc Candidates may even mention high risk medium risk The stimulus material has not articulated costs profits We may need further information Accept any relevant substantiated recommendation If the response is a one sided relevant approach with no discussion award a maximum of 4 If only one strategic option is discussed award a maximum of 5 Award a maximum of 5 if the answer has no substantiated judgment conclusion Marks should be allocated according to the markbands on page 4 8

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2 M15 3 BUSMT HP2 ENG TZ0 XX Section A Answer one question from this section 1 Creative Toys CT Creative Toys CT manufactures toys and markets them business to customers B2C online only The business operates in a leased industrial site and relies on word of mouth promotion only To make customers believe that CT s toys are better than its competitors CT sets prices slightly higher than the competition Production and sales are mostly between 1 October and 24 December Most of the employees work on temporary contracts during this busy period For the remainder of the year CT operates well below capacity utilization Table 1 contains selected data for CT for 2014 Table 1 Sales revenue 300 000 Number of toys sold 12 500 Fixed costs 121 800 Variable cost per toy 10 In 2014 the management of CT considered a change of the marketing mix to include above the line promotion lower prices and an additional sales method called toy parties Toy parties would be hosted by newly recruited CT sales representatives and attended by parents and their children At the parties parents could see the toys and children could play with them Sales would be made at the parties by the new sales representatives who would be paid on a commission only basis Toy parties could be held throughout the year and make CT s total sales less seasonal Based on market research management has estimated that the parents demand for toys is price elastic and is planning to set lower prices for all toys sold online and at toy parties The management has prepared forecasted financial data for CT for 2015 based upon the proposed change to the marketing mix shown in Table 2 below Table 2 Cash sales revenue 352 000 Closing cash balance at year end 2014 37 000 Fixed assets 40 000 Fixed costs 180 000 Raw materials 128 000 Sales commissions 32 000 Other variable costs 32 000 The Finance Manager will carry out a variance analysis in order to determine whether the proposed change to the marketing mix has been successful This question continues on the following page

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4 2 M15 3 BUSMT HP2 ENG TZ0 XX Sleep Well Limited Sleep Well Limited is a family run private limited company They own a luxurious and prestigious hotel Sleep Well SW which is located in an expensive city centre location in New York United States US Its customers are international travellers who expect comfort and excellent service and are willing to pay a high price Capacity utilization of the hotel rooms is 95 on most days However loyal customers are frustrated that sometimes they cannot reserve a room because the hotel is full The hotel management is considering extending the hotel with a new building with larger rooms and the most luxurious facilities The prices of the larger rooms in the new building will be 50 higher than the rooms in the current building Market research commissioned by SW highlighted the following In the short term the economic environment in many of the home countries of SW s customers will deteriorate However the economic environment should improve after two years The US dollar is likely to increase in value in relation to other currencies SW customers demand is price inelastic and is income elastic Severe shortage of qualified labour is forecasted in the service industry The table below shows the Operation Manager s planned activities for legal procedures and the construction of the new building Activity A B C D E F G H I Order Dependency Must follow A Must follow B Must follow C and D Must follow E Must follow E Must follow G Must follow F and H Duration 4 months 5 months 3 months 4 months 6 months 11 months 3 months 4 months 2 months However the Finance Manager is concerned that strict planning regulations imposed on construction in the city centre could create extra costs and cause delays in the completion of the new building Selling shares is considered as one option for financing the project The Marketing Manager is worried about the impact on the customer experience during the construction process This question continues on the following page

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5 M15 3 BUSMT HP2 ENG TZ0 XX Question 2 continued a Identify two advantages of Sleep Well Limited being a private limited company 2 b Define the term capacity utilization 2 c Explain one advantage and one disadvantage of using the critical path analysis model as a project management tool for the construction of SW s new building 4 Construct a fully labelled network diagram to represent the sequence of activities in the table Show the earliest starting time EST and the latest finishing time LFT for each activity and identify the critical path 6 d e f i Identify any total float from the diagram constructed in part d no working required 1 ii Using the total float you identified in part i calculate any free float show all your working 2 iii Comment on how SW could use any free float as calculated in part ii 2 Examine the option of the construction of the new building for SW 6 Turn over

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6 M15 3 BUSMT HP2 ENG TZ0 XX Section B Answer two questions from this section 3 Fujifilm Throughout its history Fujifilm has innovated It invented many products such as the first high speed colour photographic film and the first disposable camera Fujifilm was one of the most trusted brand names in the photographic industry Fujifilm adapted to changes in the external environment Digital photography and smartphones were causing a significant reduction in sales of photographic film Researchers at Fujifilm discovered that patented chemicals used in Fujifilm s photographic film products are antioxidants that could be used in cosmetic products In 2007 Fujifilm invented a skincare product line and branded it Astalift Fujifilm spent a large amount of money developing the new brand name and building awareness and loyalty Astalift quickly became one of the best selling brands in Japan s skincare product market In response to the success of Astalift Fujifilm acquired complementary pharmaceutical companies and built research and development R D facilities to develop additional cosmetic products under the Astalift brand set up a new division that develops medical equipment based on photographic film and imaging technologies such as digital X rays marketed under the Fujifilm brand name Fujifilm understood changes in societal norms such as lifestyle and income of women in many Asian and European countries At present 20 of sales are generated outside of Japan In Europe Fujifilm adapts its marketing mix for consumer preferences in each country Ultimately Fujifilm wants to transform Astalift into a global brand Today only 1 of Fujifilm s revenue comes from photographic film while 99 of revenue comes from the sales of cosmetics and medical equipment Now Fujifilm has been so successful that other companies are trying to imitate its success on a global scale Japan s beverage company Suntory has developed its own range of natural skincare products to be marketed under its well known brand name Suntory Source adapted from http www economist com http www nippon com http www brandchannel com antioxidants molecules that prevent the oxidation of other molecules which can maintain the health of cells they are often used as preservatives in cosmetics This question continues on the following page

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8 M15 3 BUSMT HP2 ENG TZ0 XX 4 BDM BDM manufactures motors used in small kitchen appliances It operates in its original factory built in 1977 which is located near the centre of a large and growing city Since 1977 property values have risen significantly and are forecasted to increase further Most of BDM s workers purchased their homes decades ago and live near the factory Younger workers however complain that accommodation near the city centre costs too much for them to live nearby Older workers are loyal to the company and in many cases have specialized skills Recently BDM s sales have rapidly increased through internal growth and the factory should reach full capacity within several years BDM s loyal customers value its unique selling proposition USP lower prices than competitors of comparable quality Customers are small businesses located in the city which use BDM s motors to help with the manufacture of inexpensive appliances for local markets 5 of BDM s sales are made through business to business B2B e commerce Sales are increasing BDM is profitable Stock turns over in 35 days and creditor accounts are settled in 30 days Last year BDM s sales revenue was 24 000 000 and its debtor s accounts balance was 2 176 000 at the end of its financial year The industry standard of credit terms is for customers debtors to pay in 30 to 35 days Because of the poor management of sales growth and use of just in case stock control BDM has a liquidity problem To resolve its liquidity problem BDM is considering two options Option 1 sell the factory and relocate to a much larger one located 27 kilometres from the city centre The new factory for BDM would cost significantly less Option 2 sell the factory and lease it back from the purchaser Change to just in time stock control management and shorten the credit terms given to customers from 30 to 15 days a Define the term internal growth 2 b Identify two features of e commerce 2 c 2 Calculate the debtor days ratio show all your working d Explain two problems other than liquidity for BDM of rapid sales growth e Analyse the possible impact on pricing and place in the marketing mix if BDM moves from its current location Option 1 f Discuss BDM s Option 2 to resolve its liquidity problem 4 6 9

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9 5 M15 3 BUSMT HP2 ENG TZ0 XX Chips to Go C2G Chips to Go C2G produce potato chips for the British market C2G s Chief Executive Officer CEO is Charles Chip who is a dynamic entrepreneur famous for taking risks with chip flavours such as banana and sour cream and chocolate fudge and promoting them with humour especially appealing to British culture C2G has created a number of successful snack products under the C2G family brand Charles uses intuitive rather than scientific decision making He rarely consults with senior managers or considers financial data C2G s value as a company in terms of goodwill brand value and other intangible assets is tied very closely to the personality and lifestyle of Charles He is the company s most valuable intangible asset and is very popular among the younger generation He is constantly in the news trying to travel around the world in a canoe or taking risks by parachuting off high buildings to gain free publicity and word of mouth promotion Current and potential investors have contacted the finance department as to what may happen to the value of these intangible assets if Charles were to have a serious accident C2G is looking for ways to increase market share in an increasingly competitive domestic snack market One long time aim for Charles has been the creation of a potato chip with all the taste of regular chips but without any fat The marketing department of C2G is very excited with this idea but the Production Manager has indicated to Charles that it cannot be produced Charles has been told and was furious A second strategic option could be to launch the potato chips into a new international market One of Charles s closest advisers has argued that C2G would need to be careful with its product and promotion as overseas customers may not share British tastes in potato chips or British humour in promotion He urges Charles to take time to carry out extensive market research of the new international market a Describe two stakeholder conflicts at C2G 4 b Explain two reasons why it may be difficult to value C2G s intangible assets 6 c With reference to C2G compare and contrast intuitive and scientific decision making 6 d Evaluate the strategic decision to launch C2G s potato chips into a new international market 9

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3 M15 3 BUSMT HP2 ENG TZ0 XX M The markbands on pages 3 4 should be used where indicated in the markscheme Section A Q1 f Q2 f Section B Q3 d Q4 e Q5 c Level descriptors Marks 0 6 0 1 2 3 4 5 6 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the stimulus material The response is mainly theoretical A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the stimulus material not just to the name of the organization A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the stimulus material

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4 M15 3 BUSMT HP2 ENG TZ0 XX M Section B Q3 e Q4 f Q5 d Level descriptors Marks 0 9 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the stimulus material 3 4 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the stimulus material not just to the name of the organization The response is mainly theoretical 5 7 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the stimulus material are made at places in the response 8 9 A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the stimulus material are made throughout the response

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5 M15 3 BUSMT HP2 ENG TZ0 XX M Section A 1 a Identify two possible types of above the line promotion that CT could use 2 Two possible types of above the line promotion that CT could use include paid for internet promotion on toy websites print newspapers magazines trade journals etc linked to the toy games industry advertisements during radio programmes aimed at children advertisements during television programmes aimed at children Accept any other relevant type of above the line promotion Accept the use of Facebook Twitter as forms of mass media N B specific application is not expected Award 1 for each correct and relevant form of above the line promotion identified that CT could use Award a maximum of 2 b Define the term variance analysis Variance analysis refers to an analysis of differences between expected or budgeted outcome amounts figures prices costs quantities profit revenue and actual outcome amounts The analysis examines if the outcome is adverse A or favourable F and investigates why the differences occurred from the forecasted or budgeted amounts Award 1 for the basic understanding that a variance analysis examines differences between actual and budgeted costs or any other figure Award a maximum of 2 for a thorough definition that goes beyond just a subtraction of figures The response may demonstrates understanding of the process rationale for carrying out a variance analysis for example to enable management decision making identify adverse A favourable F and the possible reasons why N B it is not expected that the candidate uses the exact term of adverse A and or favourable F but they should show understanding of the need of the analysis in order to make a decision take corrective action etc 2

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6 c M15 3 BUSMT HP2 ENG TZ0 XX M Explain two possible human resource implications for CT s management given the proposed change to introduce toy parties as an additional sales method Possible implications for CT s management given the proposed changes to introduce toy parties as an additional sales method include CT will have to recruit train and induct sales representatives These processes will take time CT will have to develop procedures to find people willing to sell at the toy parties CT will now have to reorganize restructure its business as the number of employees will increase Human resource planning monitoring rosters schedules may become more complex possibly requiring additional supervisors managers Given the above point CT s management may have to review employee contracts Full time workers may be entitled by law to certain types of benefits health sick pay and pension for example that they did not receive as temporary contract workers Even if not required by law full time workers may want need demand these kinds of benefits CT s management will have to react It can possibly lead to unhealthy competition conflicts between existing employees sales representatives and newer ones that are paid by commission This can reduce efficiency and can result in a fall in motivation for the management to deal with It takes time and resources to solve conflicts Accept a fall or increase in motivation only if a full and relevant explanation is given as to why it is a possible HR implication and its effect on management Accept any other relevant human resource implication Mark as 2 2 Award 1 for a relevant human resource implication of the proposed changes to introduce toy parties as an additional sales method identified and 1 for an explanation of this implication for CT up to a maximum of 2 N B if the explanation is generic and not applied to CT award 1 per implication 4

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8 ii M15 3 BUSMT HP2 ENG TZ0 XX M construct to scale a fully labelled break even chart for CT for 2014 300 Break even point Profit Total cost 208 8 200 Fixed cost 121 8 100 8700 0 10 000 0 Number of toys Award up to a maximum of 5 for any of the following 1 for appropriate labelling of both axes including clear reference to number of toys units on the x axis and cost revenue on the y axis 1 for an accurately drawn and labelled total revenue TR curve 1 for an accurately drawn and labelled total cost TC curve N B the exact figures for the break even cost revenue of 208 8 to be indicated clearly on the y axis as evidence of accuracy of scale or the scale has to be clear neatly drawn and accurate so that the figures even if not stated on the axes can be seen Just labelling TR and TC is not sufficient 1 for the identification of the break even point or quantity allow candidate own figure rule OFR 1 for a correctly drawn fixed cost FC curve with the relevant number costs or a very clear neat scale where the exact figure can be identified understood Award 0 if a candidate produces a table and award no more than 3 if the chart is not neat not drawn with a straight edge or is not to scale N B marks can be awarded for TR TC if candidates show appropriate calculations and not indicate these figures on the graph which is drawn to scale If the candidate only shows accurate knowledge of a break even chart with no values and application to CT award no more than 1 5

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9 e M15 3 BUSMT HP2 ENG TZ0 XX M Using information from Table 2 prepare an annual cash flow forecast for CT for 2015 Receipts Cash sales revenue Total receipts Payments Fixed costs Raw materials Sales commissions Variable costs Total payments Net cash flow Opening balance Closing balance 352 000 352 000 180 000 128 000 32 000 32 000 372 000 37 000 17 000 N B allow for alternative headings for receipts and payments such as inflows and outflows Award 1 for a response that demonstrates some basic understanding of an annual cash flow forecast but otherwise has numerous errors Award 2 if the cash flow forecast has two or up to three errors or omissions either in structure or headings or calculations Award 3 for a largely correct format Allow for one error or omission in structure headings Award a maximum of 4 for a correctly formatted and mathematically accurate cash flow forecast similar to above 4

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10 f M15 3 BUSMT HP2 ENG TZ0 XX M Analyse CT s management plan to reduce the price of CT s toys The management of CT has estimated that the parent s demand for toys is price elastic which means that for every percentage change in price the quantity demanded for toys will increase by a larger percentage If this assessment of demand is accurate CT s plan to lower prices will increase sales volume and total revenue TR quite significantly to make up for the fall in price per toy unit Presumably management believes that the increase in volume will make up for the lower gross margin Profit should increase as TR will be higher and the sales representatives in the toy parties are to be paid on a commission only basis anyway The discovery of the market research that the customers are price elastic indicates that CT s current pricing decision is inappropriate as customers do not really see the toys as highly differentiated better than the competitors Otherwise one would expect the price elasticity of demand to be lower Therefore the decision to reduce the price from a marketing point of view is also correct However one negative impact of lowering prices is that it could change market perception about CT Right now CT charges more than its competitors with the intention of creating the perception that CT s toys are better Lowering prices could alter that quality perception of some of the customers who might see the toys as differentiated with a USP of being creative and CT could lose some of its existing customers A lower price might mitigate the brand name of CT By increasing volume CT will have to find a new location extra storage space the former requiring more finance and the latter requiring extra costs For much of the year capacity utilization at CT is low CT may have the capacity to produce and hold enough toys for the new higher sales volume holiday months but CT will either have to make the toys earlier in the year and or have to increase capacity requiring more space and possibly more manufacturing equipment which will increase costs Of course with an increase in the scale of production CT may be able to gain economies of scale increase profit and this could possibly allow prices of its toys to fall further Accept any other relevant analysis It is not expected that the candidates covers all of the above issues 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 For one relevant argument for and one relevant argument against award up to 4 6

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12 2 a M15 3 BUSMT HP2 ENG TZ0 XX M Identify two advantages of Sleep Well Limited being a private limited company 2 Two possible advantages of Sleep Well Limited being a private limited company could include The owners the family members have limited liability Selling shares to friends and family can raise funds for the expansion This may be less costly and quicker to organize with a higher chance of being successful than fully subscribed share issue The family members will not lose control of the business as shares are sold among friends and family members only ensuring continuity of ownership Award 1 for each relevant advantage correctly identified up to a maximum of 2 N B it is not expected that the candidate applies to Sleep Well Limited b Define the term capacity utilization Capacity utilization is the extent to which the maximum capacity of the firm is being used It measure that actual output as a percentage of potential output Candidates are not expected to word their definition exactly as above Award 1 for a basic definition that conveys partial knowledge and understanding Award 1 if only the formula is stated with no definition Award 2 for a full clear definition that conveys knowledge and understanding similar to the answer above An understanding of a percentage should be demonstrated for full marks For only a relevant example to the stimulus award 1 However do not award 1 if the candidate has only copied a sentence from the stimulus 95 without showing understanding 2

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13 c M15 3 BUSMT HP2 ENG TZ0 XX M Explain one advantage and one disadvantage of using the critical path analysis model as a project management tool for the construction of SW s new building The possible advantages of using the model for SW It enables the managers of SW better planning and coordination of the building project which is a relatively large project for the hotel The model will enable the Operation and possibly the Finance Manger to identify linkage sequential and dependent relationships between activities Resources can be allocated in a better way Costs can be saved by better resources and more timely allocation The critical activities can be identified and resources can be prioritized and allocated accordingly to ensure a timely completion an important factor in the whole decision making process for the managers as severe shortage of qualified labour is anticipated Moreover identifying the critical activities and finding ways of cutting its duration can minimize the disturbances to current guests Something that the Marketing Manager is worried about The floats can be calculated to anticipate delays if any of the activities are likely to overrun given the strict planning regulations Accept any other relevant advantage The possible disadvantages of using the model for SW The reliability of the data especially task duration given by the Operation Manager can affect the accuracy of the time taken to complete the project Given the disruptions indicated in the stimulus it is important that the new building is completed on time The model may not be useful if the data used is inaccurate The managers of the new building construction might not have identified some activities in the construction process This could lead to unanticipated delays and or mistakes when completing the new building Many unexpected internal and perhaps more relevant external variables factors such as weather may affect the duration of individual tasks and of course the duration of the project The new building could open much later than expected and this would put pressure on SW s cash flow The model ignores many qualitative issues factors like the effect on customer experience and the quality of service during the construction time despite reassurances from the management Accept any other relevant disadvantage Mark as 2 2 Award 1 for each relevant and correct advantage disadvantage identified Award 1 for explaining the advantage disadvantage with reference to SW up to a maximum of 2 Award a maximum of 1 If there is no application to SW even if there is some explanation for each advantage disadvantage 4

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14 d M15 3 BUSMT HP2 ENG TZ0 XX M Construct a fully labelled network diagram to represent the sequence of activities in the table Show the earliest starting time EST and the latest finishing time LFT for each activity and identify the critical path 2 4 6 C 4 3 9 9 E 6 5 15 15 A 7 0 0 6 D 4 26 26 H 4 G 3 4 1 F 11 6 18 22 I 2 B 5 8 3 5 5 Number Critical path EST Earliest starting time LFT Latest finishing time Critical path B D E 28 28 F I EST Activity node LFT For 1 there is some little evidence of understanding of the model and some attempt at construction with some ESTs and LFTs shown Allow candidate own figure rule OFR For 6 the network is accurately constructed and well presented The critical path is identified A key is provided The ESTs and LFTs are accurate Deduct 1 if the key is missing Deduct 1 if the critical path is not identified by either crossing the activities or writing the letters separately Deduct 1 for each error in either construction or calculation Allow OFR N B any unnecessary dummy used for the construction of the network is to be judged as one error each e i Identify any total float from the diagram constructed in part d no working required LFT of the activity Duration EST of the activity For example C 9 3 4 2 A 6 4 0 2 Any activity that is not on the critical path will have a float For example activities A C G and H have a float N B working are not expected Award 1 for a correct answer no working required 1

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15 ii M15 3 BUSMT HP2 ENG TZ0 XX M Using the total float you identified in part i calculate any free float show all your working 2 Free float for an activity is calculated by The EST next activity Duration EST of that activity Activity H has a free float of 26 4 18 4 months Activity C has a free float of 9 3 4 2 months Activity A has a free float of 4 4 0 0 months Activity G has a float of 18 3 15 0 months Award a maximum of 2 for a correct answer with working shown for any of the activities above Award only 1 if a free float is indicated at any activity that is not on the critical path A C G and H but no working is given N B only apply candidate own figure rule OFR if calculations are consistent with the diagram they constructed in part d iii Comment on how SW could use any free float as calculated in part ii When calculating the free float SW can see how long the activity can be delayed before affecting the next activity If an activity like H has a free float of 4 months it means that it can be delayed by such a duration without affecting the start of activity I Otherwise a larger delay than the free float will affect the duration of the project as I is on the critical path SW can therefore allow a slack of up to the duration of the free float and possible move some resources towards the critical activities if the aim is to reduce duration to minimize disturbances and reduce costs Similarly activity C can be delayed by up to 2 months without affecting the start of activity E which is on the critical path and therefore the overall duration of the project Award 1 for a brief comment such as a response that just describes what a free float is and its possible effect on the next activity Award 1 for application either in terms of figures relationship between particular activities or to SW s particular issues needs N B candidates must specifically refer to free float and not simply generic float for full marks It is not expected that the candidate provides such a detailed response 2

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16 f M15 3 BUSMT HP2 ENG TZ0 XX M Examine the option of the construction of the new building for SW Arguments for the construction of the new building An economic recovery predicted after two years also supports the proposed strategy as the project is estimated to be completed in 28 months As consumers income grows with an income elasticity of demand over 1 for services luxury products SW is likely to see a significant increase in demand SW will be ready with extra capacity and the most luxurious amenities and services to satisfy their customers needs Profits are likely to grow and the costs of the new building can be quickly recouped Moreover the need to increase the price for the new rooms is likely to be tolerated by customers given their price inelastic demand Total revenue is likely to increase even if SW loses some customers to cover some of the investment costs and the running costs Arguments against the construction of the new building The construction time as currently planned will last for over two years if everything goes to plan SW s managers may put up with some noise and difficulties for such a time period but will existing customers The strong might make the price of the new hotel even higher and possibly unaffordable for its international travellers SW might not be able to fill the extra capacity built The current lack of capacity during busy periods combined with an increase in demand is likely to harm the reputable brand image with more customers turned away Before the recovery a recession deterioration in the economic environment is forecasted Although demand is price inelastic A significant fall in customers demand is likely for a luxury product given the income elasticity Can SW sustain these potential losses and be able to finance the new building The Finance Manager is concerned that time and money will be spent on legal processes to ensure building permission and or in the worst case scenario the actual building will not take place N B it is not expected that the candidate develops a full examination of the issues regarding the legal status and the source of funds used The severe shortage of skilled labour is likely to reduce the profitability of the new building as more staff will be needed to operate the extra capacity Staff training may be required for the new level of service and wages will have to increase given the staff shortages Accept any other relevant arguments for and against It is not expected that the candidate covers all of the above issues 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 For one relevant argument for and one relevant argument against award up to 4 6

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18 M15 3 BUSMT HP2 ENG TZ0 XX M Section B Note to examiners for question 3 do not penalize candidates for the use of skincare or cosmetics interchangeably in their responses 3 a Describe one internal factor and one external factor possibly affecting innovation at Fujifilm Possible internal factors affecting innovation at Fujifilm Availability of finance needed to spend on the process of innovation which is the successful commercial use of an invention It is said that a large amount of money was spent on developing new product s Technological know how and clearly an innovative culture which allowed this to be applied to the creation of new products such as high speed colour photographic film Fujifilm s management might have been encouraged by past success Fujifilm pioneered many products Attitude to risk clearly Fujifilm was historically a risk taker A company who spent money on inventions to bring these products to the market Possible external factors affecting innovation at Fujifilm The technological changes in the external environment have created new competitive forces pressures Digital photography and smart phones were causing a significant drop in sales of film which was one of Fujifilm s core competencies Fujifilm had to react and innovate Fujifilm understood changes in societal norms outside of its control like lifestyle and change in income which allowed it to create new needs products to meet changes in social trends Accept any other relevant issue Mark as 2 2 Award 1 for each relevant and correct internal external factor identified and 1 for describing the factor in relation to Fujifilm up to a maximum of 2 Do not credit candidates twice for describing either two possible internal or two external factors affecting innovation at Fujifilm 4

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19 b M15 3 BUSMT HP2 ENG TZ0 XX M Explain one benefit of a patent for Fujifilm A patent is a legal right granted to an organization a person to be the exclusive user of an invention for a specified period of time Fujifilm was granted patents on the chemicals used in its traditional photographic film products These are antioxidants that were used in the creation of new cosmetic skincare products The possible benefits of patents for Fujifilm For the duration of the patent given Fujifilm can create a USP competitive advantage that can also act as a barrier to entry for other competitors In this case the use of the patented antioxidants enables Fujifilm to develop new and be rewarded for an innovative cosmetic skincare product that competitors legally cannot copy Given the high costs and the long duration of research and development R D when no income was generated for Fujifilm a patent can encourage Fujifilm to create future products The patent may allow Fujifilm to charge a premium price to recover the R D costs and to have funds available for further future research Accept any other relevant benefit for Fujifilm with an explanation N B a definition of patent is not required for full marks Award 1 for a relevant benefit with an additional 1 for application to Fujifilm Award a maximum of 2 2

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20 c M15 3 BUSMT HP2 ENG TZ0 XX M Explain one benefit and one cost of using research and development R D for Fujifilm Given the changes in the external environment mentioned in the stimulus research and development R D enabled Fujifilm to develop highly innovative and differentiated products and to have a first mover advantage in many segments and markets There is evidence that Astalift as an example became one of the best selling brands in Japan R D allowed Fujifilm to explore these options before bringing them to the market place as new innovations Hence the risk of failure was much reduced R D would also be helpful with the appropriate decision on the marketing mix of the new innovations Moreover the process of granting a patent after R D has been carried out also involves costs for the organization The granting of a patent can possibly enable Fujifilm to charge a premium price that is likely to satisfy the shareholders if they are concerned about increasing costs of R D However the process of R D as well as ensuring a patent for Fujifilm and other pharmaceutical or high technology industries is particularly expensive and time consuming Without granting a patent these costs may not be recouped Apart from the direct costs of R D we must also note the opportunity costs to Fujifilm Research in itself is no guarantee of commercial success Would these funds for R D be better spent on supporting other products in the Fujifilm portfolio We must also note the time costs delays involved in researching and developing a new product and bringing this to market Working capital could be tied up in a product s R D idea which might only remain an invention and therefore not generate any future sales or profits Fujifilm s success can be short lived as competitors can eventually imitate its innovation Accept any other relevant issue Mark as 2 2 Award 1 for a relevant and correct benefit cost and 1 for an explanation of this benefit cost in relation to Fujifilm up to a maximum of 2 N B if the explanation is generic and not applied to Fujifilm award 1 per benefit cost up to a maximum of 2 Despite the fact that the examples of costs are rather generic some attempt at application must be evident 4

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21 Using the Ansoff matrix examine Fujifilm s decision to diversify New Existing Market penetration Product development New Product Existing Market development Diversification Market d M15 3 BUSMT HP2 ENG TZ0 XX M One may argue that diversification as one of the four strategic growth options suggested by Ansoff is the most risky one Fujifilm ventured into unknown new markets cosmetics and new targeted customers segments which they had no experience of targeting before Fujifilm had no security of knowing the industry as well as knowing customers hence a very risky strategy the most risky one among the four Similarly the diversification into medical equipment can also be seen as diversification albeit perhaps a more related one However by pursuing unrelated diversification or diversification into the cosmetic industry and the creation of the brand Astalift one may argue that Fujifilm actually reduces the risk of relying on their film core product that gradually became obsolete The researchers at Fujifilm were competent enough to see the possible synergy the common know how and were able to build on its existing knowledge in the film industry and transfer patents to a new industry the skincare industry Hence the risk of using diversification as a growth strategy has been much reduced An appropriate strategy especially in the short run until the patent expires Moreover Fujifilm acquired pharmaceutical companies and developed R D facilities to support this high risk strategy with successful results Diversification can also be seen as the most expensive option as new markets have to be researched product to be created and marketed Nevertheless it looks as if Astalift was successful as a diversification strategy Accept any other relevant examination It is not expected that the candidates covers all of the above issues If the candidate merely states the Ansoff matrix with no application to Fujifilm award a maximum of 1 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 6

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23 e M15 3 BUSMT HP2 ENG TZ0 XX M Discuss the decision of Fujifilm to create the new brand Astalift It is expected that candidates will discuss the decision of Fujifilm to create the new brand as opposed to just discussing the creation of a new product Consumers view a brand as an important part of the product and branding can add value to the product and can help with the positioning of the product The company brand name Fujifilm was not used for the cosmetic skincare product One may argue that Fujifilm management took a chance as the Fujifilm brand has been very reputable highly recognizable and successful Throughout its history Fujifilm kept on enhancing the company brand We assume that the management at Fujifilm were aware of the possibility that if Fujifilm operates under the same brand name and used a family branding strategy for the new cosmetic skincare products current customers and the targeted potential customers may be confused Despite creating a strong technical synergy between the new cosmetic line and the current product by using its patented antioxidants chemicals from Fujifilm s traditional film products the management understood that the targeted customers might be reluctant to buy a new cosmetic skincare line branded by the same name as other unrelated products Hence a new brand name and a new and separate identity was created Product individual branding was used Fujifilm s management invested heavily in creating the new separated and distinctive brand name Astalift Clearly this choice is much more expensive for an organization rather than just extending a successful brand name Hence it can be argued that Fujifilm took unnecessary risk given the reputation of their brand It definitely spent a considerable amount of money on creating and developing the brand However given the success of the new skincare cosmetic product this argument cannot be judged as a significant one The risk paid off Astalift became one of the bestselling in Japan s skincare product market Figures suggest that the strategy of entering the Japanese market first to establish brand awareness and test the new brand was a successful strategy The positioning market share in Japan and the increase in revenue as stated in the stimulus provides the evidence The above are very significant arguments with strong evidence of a great strategic response and success of creating a separate brand Moreover brand erosion of Fujifilm might have occurred if the cosmetic skincare line was not successful and branded under Fujifilm The medical equipment is traded under the original brand name However the medical equipment created by Fujifilm was successful Perhaps there was no need to invest heavily on creating a new brand and identity and save on marketing costs However these products were closer to Fujifilm s past core products Still Fujifilm evidently made a commercial success of the new product line given their global ambition and the current market development strategy used Perhaps the challenge of using the Astalift brand name will be more of a challenge in Europe 9

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24 M15 3 BUSMT HP2 ENG TZ0 XX M One has to remember that while diversifying into the skincare cosmetics market Fujifilm competes in Asia and in Europe with many well established companies Perhaps in Europe a strong and well established brand name of Fujifilm and not Astalift might be more appropriate Perhaps regardless of the chosen name Fujifilm s success is going to be reduced given the intensive competition in the European markets Moreover it looks like other companies such as Suntory are also diversifying into cosmetic skincare products Hence the competitive advantage and the USP created by Fujifilm may be short lived Fujifilm has been very successful in the short run but its long term success might be less certain with the new brand Possible judgment substantiated conclusion As well as understanding the needs and aspiration of women Fujifilm after undisputed success in Japan is well on its way to creating a global cosmetic brand that supports well the strategic option of diversification 20 of its sales come from abroad However some of the patents are likely to expire and other companies can copy some of the ingredients and the technology used when producing the cosmetic skincare products Perhaps it can be an advantage if customers associate the product line with Fujifilm sort of family branding However financially the new brand was a commercial success and Fujifilm has the infrastructure the financial ability and the impetuous to continue to develop innovative products Accept any other substantiated discussion and conclusions It is not expected that the candidates incorporate all of the above arguments A balanced analysis incorporates at least two arguments for and two arguments against 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 the candidate covers the issue of new product only rather than brand award a maximum of 5 Award a maximum of 5 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 5 7 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer Marks should be allocated according to the markbands on page 4

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25 4 a M15 3 BUSMT HP2 ENG TZ0 XX M Define the term internal growth 2 Internal growth occurs when a business expands without merging acquiring partnering or otherwise being involved with other businesses Sometimes referred to as organic growth internal growth involves increasing sales or investment in capacity It is a growth from within Candidates are not expected to word their definition exactly as above Candidates are not expected to provide an example 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 A comparison to external growth or an explanation of what internal growth is not required for full marks For only a relevant example or application to the stimulus award 1 b Identify two features of e commerce 2 Two features of e commerce are that it allows for the business goods and services it sells are available electronically eg via the internet 24 hours per day national or global reach of customers beyond local borders instant quick cheap two way communication between businesses and customers without the need for face to face meetings targeting of marketing messages to personal customer requirements accept any other relevant feature Award 1 for each feature of e commerce identified up to a maximum of 2 c Calculate the debtor days ratio show all your working Debtors 365 Debtor days ratio Total sales revenue 2176 000 365 33 09 days Accept 33 days or 34 days 24 000 000 Award 1 for correct working and 1 for the correct answer Award up to a maximum of 2 There must be some indication in the answer that days are calculated for full marks 2

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26 d M15 3 BUSMT HP2 ENG TZ0 XX M Explain two problems other than liquidity for BDM of rapid sales growth When sales grow rapidly the demand on a firm s stock inventory increases There are risks of overtrading although this term is not expected The demand on firms stock inventory increases and unless BDM is able to re stock quickly it may find that it does not have enough goods to sell to meet demand and customers may become dissatisfied and may choose competitors if deliveries fail to keep up Customers patience will be tested and even though BDM s USP keeps customers loyal this lack of stock aspect may make customers move to competitors BDM is to reach full capacity within a few years Working at full or near full capacity can exert extra pressure on employees and managers higher costs for the maintenance as well as depreciation of the machines Moreover extra pressure can result in a fall in quality Its USP may be eroded Rapid sales growth must also be accompanied with increased managerial efficiency and improved customer service to maintain their loyalty in the latter There will also be pressure on their supply chains and distribution channels to ensure that deliveries are on time BDM may have to find new channels especially as B2B e commerce grows further Mark as 2 2 Award 1 for an appropriate identification of a problem from rapid sales growth and an additional 1 for explanation and application to BDM Award a maximum of 2 If there is no application award a maximum of 1 4

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27 e M15 3 BUSMT HP2 ENG TZ0 XX M Analyse the possible impact on pricing and place in the marketing mix if BDM moves from its current location Option 1 Location has importance to BDM s pricing element in the marketing mix At present BDM s unique selling point USP is lower price than producers of similar products of comparable quality Thus at present many of BDM s customers get the product they want at a better price than other similar manufacturers offerings and at a convenient location Some possible issues regarding place Currently the location is very convenient to most of its customers who are located nearby in the city centre location If BDM moves 27 kilometres away as Option 1 suggests its location will be less convenient for its customers who may move to competitors 5 of BDM s sales are online a place and that percentage is growing To these customers where BDM is located is less important At present the percentage of customers who purchase online is low enough not to be a significant factor in the analysis of place in BDM s marketing mix Over time however that will change Some possible issues regarding pricing Additional costs might occur that might be passed on to its customers for more expensive product delivery BDM may have to find new supply chain partners The prices for delivered products may rise which conflicts with BDM s USP Especially if one of BDM s competitors is located in the city centre However the new factory will result in significantly lower costs Hence BDM will be able to maintain the price its competitiveness or even enhance its competitiveness by reducing the price If Option 1 leads to an increase in growth further economies of scale are likely and price reductions could be possible However if the additional delivery costs increase prices and outweigh these economies of scale the price differential that BDM currently enjoys over competitors would be reduced The move could hurt BDM s USP and lead to a reduction in sales volume and revenue Also older skilled workers may rather retire than commute New workers could be hired which may affect motivation productivity and staff turnover resulting in increased costs which consequently might increase the price or reduce profit It is not expected that the candidate covers all of the above issues It is not expected that the candidate divides the answer into the two separate issues as above N B HR issues are not part of the marketing mix Award only if there is a direct link made to the effect on price or the methods of distribution less people are needed when using e commerce A reference to costs or profit without a link to the effect on the price should not be regarded as complete coverage and application For one relevant issue that refers to either price or place but is one sided award up to 3 6

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29 f M15 3 BUSMT HP2 ENG TZ0 XX M Discuss BDM s Option 2 to solve its liquidity problem Option 2 includes three strategies actions Sell the factory and lease it back from the purchaser change to a just in time stock control management and shorten the credit terms given to customers from 30 to 15 days Option 2 especially selling the factory provides a one off short term windfall cash injection to the company but leasing costs will need to be considered over the longer term and there is no information in the stimulus to say how significant this could be The liquidity problem may be solved when the first aspect of Option 2 is completed but BDM loses its most valuable asset in a prime city centre location One may judge this point as a very significant argument as BDM will have an uncertain expense in the future when and if the lease costs increases Other aspects strategies of Option 2 could help BDM solve its liquidity problem as both just in time and shorter credit terms for customers would reduce cash outflow and increase cash inflow However just in time stock control can be difficult and expensive to set up and manage It makes BDM more dependent on reliable and timely delivery of raw materials Cash may be needed to implement the new system including training If suppliers are not timely and reliable BDM could end up not meeting its schedules and irritating customers reducing cash inflows and making the liquidity problem worse However with reduced funds tied up in stock compared to the current just incase method cash outflows would be better managed and BDM will not have unproductive assets money tied up in stock The cash outflow could be smaller although more frequent depending on the nature of the new supplier relationships to create just in time Still BDM can negotiate better credit with its suppliers instead of changing the stock management system As for shorter credit terms BDM s customers may object to the shorter credit terms which would not align with industry standards Changing credit terms at short notice may not be possible given that BDM s customers may also have to renegotiate with their own customers Goodwill in the whole industry may be reduced given the interdependence of cash flow With a considerably shorter credit terms of 15 days only which is below the industry average BDM s customers may not have the finance to pay Customers might go to BDM s competitors just for the more favourable credit terms despite BDM s USP Again customer loyalty for BDM will be tested given rise to future liquidity issues However if customers are willing and able to pay especially if the quality is perceived higher than the competitors a reduction from 30 days to 15 days is a significant one and would enable BDM to have the cash quicker hence the liquidity problem might be reduced In conclusion it is expected that the candidate will come up with a substantiated conclusion The candidate may suggest that further negotiation and discussion of credit terms will be needed as well as investigating and forming new supply chain relationships for just in time to operate This will take time for BDM to achieve Accept any other relevant discussion and arguments 9

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30 M15 3 BUSMT HP2 ENG TZ0 XX M It is not expected that the candidate incorporates all of the above arguments N B it is expected that the candidate refers to all of the strategies actions sell and lease back reduce credit terms time and change to just in time with one argument for and one argument against each strategy action for a balanced response N B for one relevant argument for one strategy action that is one sided award up to 2 For more than one relevant argument for one strategy action that is one sided award up to a maximum of 3 For two balanced strategies actions with a judgment award up to 6 Award a maximum of 5 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 5 7 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer For the top markband it is expected that the candidate provides a balanced analysis of the three strategies actions with a substantiated judgment Marks should be allocated according to the markbands on page 4

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31 5 a M15 3 BUSMT HP2 ENG TZ0 XX M Describe two stakeholder conflicts at C2G One conflict is between the current and potential investors and Charles due to his risky outside activities that he presumably believes attracts positive attention publicity Investors welcome Charles s attempts at free publicity through his adventures but are concerned about the impact on the company if he was to have a serious accident Shareholder value would be affected with no natural leader in waiting and minimal consultation from Charles The second conflict exists between the marketing department and or Marketing Manager and the Production Manager over the creation of a zerofat chip From a marketing point of view they are very excited about the idea of creating a new zero fat chip as being further evidence of C2G s innovation Clearly though the practical applications of creating this chip have been overlooked as the Production Manager has indicated that this cannot be achieved There is a further implied conflict between Charles s intuitive decisions and his senior managers given that Charles rarely consults The senior managers also seem very wary of bringing Charles difficult news such as the technology does not exist to create the zero fat chip Accept any other relevant description Mark as 2 2 Award 1 for an appropriate identification of two stakeholders award an additional 1 for a description of the conflict with reference to C2G up to a maximum of 2 4

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32 b M15 3 BUSMT HP2 ENG TZ0 XX M Explain two reasons why it may be difficult to value C2G s intangible assets From the stimulus it appears that the intangible value of C2G as a company in the form of goodwill brand value reputation and so on is tied to the personality and lifestyle of Charles as he is very popular with the younger generation It appears that Charles is responsible for creating some of the innovative flavours which have made the company so successful The difficulties of this for C2G s intangible assets is that it can be hard to objectively value the contribution of Charles s personality and lifestyle as well as his innovative attitude while the company is still operating This can have a true positive impact on the brand value and effectively brand loyalty of customers but the value can either be estimated or proven when the company is sold for a price above its tangible assets Until then the intangible assets can only be estimated if at all Perhaps C2G can research the value of family branding more easily measured in terms of research on brand recognition but the effects on personality factors can be very difficult to accurately measure Moreover the success of the brand and hence intangible asset could also be down to very good promotion or targeting Other companies without personality cults also have successful brands Innovation as a contributor to C2G s tangible assets can also be very difficult to measure due to the fact that one factor can be difficult to isolate in terms of its contribution to the intangibles Moreover inconsistencies of reporting systems between companies exist Current financial statements provide very little information about these assets and there is not a standardized unified method of valuation of the intangible assets Therefore the Financial Manager is unlikely to insert a figure that is no more than estimated Accept any other relevant explanation Mark as a 3 3 N B the question is about the difficulties of the measurement the difficulties of the process and methods of measuring The question is not about if and how Charles is an intangible asset Award 1 for identifying a relevant difficulty in valuing intangible assets Award an additional 1 for development of this point Award an additional 1 for the application of the difficulty directly to C2G Award up to a maximum of 3 For 6 two difficulties of valuing intangible assets must be linked and explained with reference to C2G N B it is expected that apart from the personality lifestyle of the CEO one more issue is identified explained and applied 6

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33 c M15 3 BUSMT HP2 ENG TZ0 XX M With reference to C2G compare and contrast intuitive and scientific decision making Features of intuitive decision making include the use of gut feeling emotion based on life or work experiences to make a decision for a business a reluctance to use market research or financial data which would be used by a more scientific style of management For example to decide whether to launch a new product or service into a new market There is evidence from the stimulus that Charles relies on his own natural abilities to make decisions and he rarely consults This has led to a number of very successful and innovative snack products appealing to British culture Given his success it is fair to argue that intuitive decision making has been instrumental in C2G s financial performance and given that Charles is very much in control of the organization scientific methods may be inappropriate as it will hinder its creativity innovation and free spirit His intuitive decision making enables C2G to create a competitive advantage in the British market in an industry that is probably saturated There are many potato chip producers However his lack of consultation with senior managers such as the Finance Marketing and Production Managers may result in less than effective decisions in the future Scientific management however requires a much more analytical and considered approach to decision making based not only on financial and market research data but also the application of tools and techniques such as decisiontrees networks or force field analysis The stimulus indicates that for C2G to successfully penetrate a new international market with a different cultural makeup considered market research or sometimes referred to as cultural intelligence CQ is required The contrast with Charles s own thinking could not be more marked However for the successful entry into this new unknown market he will have to consider adopting more scientific methods as his closest adviser admits given the fact that his strengths are in and for the British market It appears that Charles s intuitive decision making might frustrate the Marketing department Manager as well as the Production Manager Conflicts between internal stakeholders can reduce the efficiency of the organization as well as its reputation Both are relevant approaches to decision making but in this example it would be foolish of Charles to ignore scientific and rely just on his intuition given that he is thinking of taking C2G into a completely new untried market The similarities between the methods can be explained as both methods result in a decision and both methods can be effective or otherwise One may also argue that for each decision making especially the scientific one some degree of intuition and especially experience is being used as the decision is made by humans It might be unrealistic to assume that senior managers such as the Finance or the Marketing Manager do not rely on their interpretation experience background and so on when using a more scientific decision making method Accept any other relevant analysis It is not expected that the candidates covers all of the above issues 6

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34 M15 3 BUSMT HP2 ENG TZ0 XX M It is expected that the candidate provides even briefly the main characteristics features of the different decision making methods with reference to some advantages and disadvantages of each with application Candidates may refer to the similarities however do not penalize if they do not do this in their response 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 For one relevant argument for and one relevant argument against one decisionmaking method award up to 4 For 5 it is expected that the analysis is relevant and detailed but it may lack some balance For example one argument is missing For 6 it is expected that the analysis will contain at least one detailed argument for and at least one detailed argument against each decision making method with application to C2G Accept mirror image arguments Marks should be allocated according to the markbands on page 3 d Evaluate the strategic decision to launch C2G s potato chips into a new international market The decision to launch C2G s potato chips into a new international market would seem suitable given the increasingly competitive snack market at home The Production Manager rejected the first and possibly the more favourable decision to launch a new type of potato chip Charles would appear confident that his current products yet unique chip flavours would provide C2G with a market gap to be exploited Assuming that suitable resources would be made available to finance the strategic move the decision could be viewed as a market development opportunity in the Ansoff matrix as a growth strategy and as an internal growth strategy Using well received concept products and taking it to a new market is a medium risk strategy which the candidate may judge as an advantage or a disadvantage However internal growth is a slower method of growth but in this case may be more suitable than any other form of external growth like takeover mergers where Charles might have to modify his leadership style Both current and potential investors should be content with this decision N B an application of Ansoff matrix is not required and is given as an illustration of a strategic tool a candidate may wish to use in their response To ensure the success of the decision additional finance will be required to adapt some if not all of C2G s marketing mix as suggested by Charles s closest advisers Especially the promotion and the product to ensure that there are no misunderstandings about their products or Charles s personality and lifestyle choices 9

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35 M15 3 BUSMT HP2 ENG TZ0 XX M A carefully considered public relations campaign will need to be created so that the brand value of C2G is not diluted Translators marketing consultants at the new overseas market will need to be employed so that potential consumers are not confused by banana and sour cream and other flavours which may not translate well into local media or other above the line promotional methods Finance will also need to be found to fund further cultural intelligence information and of course further market research to see if the growth strategy is on track once C2G enters the market Clearly given that knowledge of this new market may be developing on top of the extra costs of the suggested need for marketing mix adaptation Charles will need to review his intuitive decisionmaking style in a market in which he is unfamiliar Moving into a new international market will take time Initial sales may be small and with further promotional support it is hoped that the product life cycle will enter the growth phase Given that C2G s success is linked to the personality of Charles patience will be critical and it is indicated in the stimulus that Charles may lack this The decision to move into a new international market is justified from the stimulus given competitive pressures in domestic markets The creation of a zero fat chip although currently not possible given increasing concerns about obesity could prove to be a potential cash cow for C2G However given the conflicts outlined in the stimulus and the associated challenges of entry into a new international market the decision to move into a new market will still be risky unless Charles is willing to modify his leadership style and communication between departments within C2G improves It is expected that the candidate will provide some conclusions and judgment It appears that the arguments for based on some of the above arguments reasons especially C2G s past success and the current market conditions are stronger than the arguments against Provided some attention is paid to the market research and product adaptation C2G should launch the chips into a new international market Accept any other relevant evaluation with substantiated judgment It is not expected that the candidate incorporates all of the above arguments 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 5 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 5 7 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer Marks should be allocated according to the markbands on page 4

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2 M15 3 BUSMT SP2 ENG TZ0 XX Section A Answer one question from this section 1 Nzuri Kio NK Nzuri Kio NK is a company that manufactures products made of glass such as windows and table tops NK sells its products in its own regional trading bloc a group of eight countries that all have developing economies NK is located in a poor country where the national government is not very efficient and public sector services are limited The country s infrastructure needs investment and quality of life is low At school students are in very big classes with over sixty students in each few students complete middle school The manager of NK is considering purchasing new high quality equipment for its factory glass making machines from Carrucci SpA Carrucci SpA is an Italian company that makes the best glass manufacturing equipment in the world Its computerized equipment is innovative and very efficient Glass can be cut perfectly with almost no waste However the equipment is expensive and requires highly skilled workers The new equipment would lead to a better product which should result in higher sales and a higher gross profit margin The total cost of the equipment is 800 000 NK is considering two different sources of finance Option A a seven year 720 000 bank loan Option B selling 800 000 in shares Financial information for NK for the year ending 31 May 2014 Cash Cost of goods sold Creditors Debtors Expenses Interest Loan capital Net fixed assets Retained profit Share capital Sales revenue Short term borrowing Stock Tax 176 000 3 900 000 230 000 674 000 3 800 000 120 000 X 2 600 000 970 000 300 000 8 200 000 270 000 320 000 70 000 This question continues on the following page

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4 2 M15 3 BUSMT SP2 ENG TZ0 XX Exploration Toys ET Exploration Toys ET manufactures educational toys Dr Berac Lo c set up the business in 2006 ET s unique selling point USP is that its toys are not only safe and fun but also teach children to explore and solve problems ET sells directly to consumers online business to customers B2C and relies only on word of mouth promotion ET set its toy prices higher than those of its competitors Table 1 selected data for ET for 2014 Sales revenue 300 000 Number of toys sold Fixed costs Variable cost per toy 12 500 121 800 10 By 2014 sales had stopped growing A marketing consultant told Berac that with only word of mouth and B2C e commerce sales the situation would not improve She recommended that ET restructure its marketing mix to include more promotion lower prices and an additional sales method called toy parties ET would need to recruit part time sales associates representatives to host the toy parties At the parties parents could see the toys and children could play with them The sales associates would sell ET s toys on a commission only basis However if sales grew significantly ET would need to lease a larger factory which would increase fixed costs Berac forecasted financial data based on the marketing consultant s recommendations Table 2 forecasted financial data for ET for 2015 Cash sales revenue Closing cash balance at year end 2014 Fixed assets Fixed costs Raw materials Sales commissions Other variable costs 352 000 37 000 40 000 180 000 128 000 32 000 32 000 word of mouth promotion information passing from one person to another or others through oral communication This question continues on the following page

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6 M15 3 BUSMT SP2 ENG TZ0 XX Section B Answer two questions from this section 3 Starvation Peak Running Shoes SP Starvation Peak Running Shoes SP is a shop that sells running shoes in Santa Fe New Mexico United States US Its name comes from the local mountain called Starvation Peak SP customers can buy running shoes at a lower price online but SP has a unique selling point USP concerning its vision and its local reputation SP s vision statement is Running sustains life locally and globally Starvation Peak New Mexico SP is very well known locally as they support the local running community in the Santa Fe area They do so in several ways by sponsoring running days at schools giving discounts to children and students offering running clinics where SP employees help people improve their running techniques organizing races and other local events The biggest event organized by SP is its annual Race to the Top on Starvation Peak According to a local legend a tribe of Native Americans forced enemies up to the peak where they died of hunger starvation SP promotes the event with the slogan Running sustains life even on Starvation Peak Race to the Top has been popular for ten years However there are now conflicts between stakeholders Local businesses like the event as it attracts tourists to the area One pressure group however argues that it portrays Native Americans in a negative way Another pressure group argues that the event damages the natural environment of the mountain The local authorities managing Starvation Peak have been asked to refuse permission for SP s Race to the Top Source International Baccalaureate Organization 2015 a Describe one type of below the line promotion that SP may use to promote its running clinics 2 b Explain two reasons why SP supports the local running community 6 c Analyse the role of SP s vision statement 5 d Advise the local authorities as to whether permission for SP s Race to the Top should be refused 7

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7 4 M15 3 BUSMT SP2 ENG TZ0 XX The significance of changes in international labour mobility Though the global population may grow from 7 billion in 2011 to 7 6 billion by 2020 many countries will experience a decline in the number of working age people Already in Japan and Europe each year more people retire from the workforce than young people enter it By 2020 this problem will also affect Russia Canada and China Other countries such as India Brazil and Indonesia have young populations and young workforces Unfortunately many people lack the skills that employers need A recent study found that 31 of employers worldwide struggle to fill jobs requiring basic skills 65 of multinational companies have difficulty recruiting new employees with advanced skills In emerging economies the problem is worse Difficulties in meeting operational objectives of recruitment prevent many companies from meeting their strategic objectives Companies are responding by recruiting new employees from other countries This practice is called expanded recruitment It has led to more international labour mobility diverse workforces within companies and diversity in global cities Supporters of expanded recruitment argue that the labour problem is demographic the best solution is to make labour mobility easier Furthermore diversity both within companies and in society should improve international understanding and will increase creativity Critics of expanded recruitment argue that it does not solve the real problem many jobs require advanced skills and most educational systems have not responded to those needs Expanded recruitment has also created other issues for companies such as problems in communication Expanded recruitment has also led to some anger in countries and local communities not accustomed to large immigrant populations Source adapted from http www ey com Used with permission a Identify one opportunity and one constraint for companies caused by demographic change b Comment on one potential communication problem for a company with a diverse international workforce 2 c Explain the statement difficulties in meeting operational objectives of recruitment prevent many companies from meeting their strategic objectives 4 d Analyse one strategy that a global company could adopt for developing future human resources you may refer to a global company that you have studied 5 e 7 Discuss the significance of changes in international labour mobility 2 Turn over

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8 5 M15 3 BUSMT SP2 ENG TZ0 XX Coca Cola India The American company Coca Cola is investing financially and strategically in India Thirteen Indian businesses have received contracts to prepare and package Coca Cola drinks across India Over 7000 distributors and 2 2 million retailers supermarkets and restaurants are selling Coca Cola drinks For Coca Cola success in India is an important part of the business s strategy as India has a population of over 1 billion people A question faced by Coca Cola is whether it should use market development or market penetration strategies Coca Cola India has a wide product portfolio including Coca Cola and other brands such as Limca and Sprite Coca Cola India directly employs over 25 000 people and has created indirect employment for more than 150 000 people through its vast logistics supply and distribution Coca Cola India has recently piloted an online store for the growing e commerce market through the website Coke2Home com The online store will provide consumers with an alternative channel to buy Coca Cola drinks Consumers can also learn about the full range of Coca Cola s drinks on the website and sign up to receive special promotions via email or mobile phone message Although the online store is working very well in some cities there are still some difficulties Because delivery costs are high Coke2Home com accepts only large orders such as for parties and celebrations Many Coca Cola retailers and supermarkets fear that Coke2Home com will create a new form of competition Source adapted from http www coca colaindia com and S Sharma 31 May 2013 Mumbai Times Business Times of India a Define the term product portfolio 2 b i 2 Draw and label all elements of the Ansoff matrix ii Explain one advantage and one disadvantage for Coca Cola in India of using the Ansoff matrix as a decision making tool 4 c With reference to Coca Cola analyse the role played by multinational companies in the global business environment 5 d Discuss the costs and benefits to Coca Cola India of e commerce 7

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3 M15 3 BUSMT SP2 ENG TZ0 XX M The markbands on pages 3 4 should be used where indicated in the markscheme Section A Q1 c Q2 d Section B Q3 c Q4 d Q5 c Level descriptors Marks 0 5 0 1 2 3 4 5 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the stimulus material The response is mainly theoretical A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the stimulus material not just to the name of the organization A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the stimulus material

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4 M15 3 BUSMT SP2 ENG TZ0 XX M Section B Q3 d Q4 e Q5 d Level descriptors Marks 0 7 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the stimulus material 3 4 A description with some knowledge and or understanding of relevant issues and concepts Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the stimulus material not just to the name of the organization The response is mainly theoretical 5 6 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the stimulus material are made at places in the response 7 A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the stimulus material are made throughout the response

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5 M15 3 BUSMT SP2 ENG TZ0 XX M Section A 1 a Using a PEST framework describe two external factors that may affect NK 4 PEST stands for political economic social and technological The categories are not perfectly distinct External factors in the stimulus include Political regional trading bloc inefficient national governments limited public sector services Economic developing economies weak infrastructure Social low quality of life poorly educated population Technological weak infrastructure by inference weak high technology Accept any relevant external factor Mark as 2 2 Award 1 for each relevant external PEST factor identified and 1 for an appropriate description up to a maximum of 2 b Using data from the table i calculate loan capital X show all your working All figures in 000s Total of all assets 176 674 320 2600 3770 Total of liabilities and owner s equity other than X 270 230 300 970 1770 X 3770 1770 2000 Award 1 for working and 1 for the correct answer Award up to a maximum of 2 2

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6 ii M15 3 BUSMT SP2 ENG TZ0 XX M construct a fully labelled balance sheet for NK 4 NK s balance sheet as at 31 May 2014 all figures in Net fixed assets 2 600 000 Current assets Stock Debtors Cash Total assets 320 000 674 000 176 000 Current liabilities Creditors Short term borrowing Total 230 000 270 000 3 770 000 500 000 Net assets 3 270 000 Share capital Loan capital Retained profit Total capital employed 300 000 2 000 000 970 000 3 270 000 Award 4 if the candidate constructs an accurate balance sheet that balances according to the IB prescribed format such as the vertical balance sheet above or the horizontal model typically used in the United States The balance sheet must be dated Award 3 for a largely accurate balance sheet that balances according to a generally accepted format such as the vertical format above or the horizontal model typically used in the United States Award 2 if the candidate constructs a largely recognizable balance sheet but it does not balance or it has two major problems of classification Award 1 if the candidate conveys some idea of what a balance sheet is iii calculate NK s gross profit margin no working required Gross profit 4 300 000 100 52 44 Sales revenue 8 200 000 Gross profit margin is 52 44 Accept 52 4 Award 1 for the correct answer no working required 1

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7 iv M15 3 BUSMT SP2 ENG TZ0 XX M calculate NK s forecasted gearing ratio for Option A and for Option B show all your working Gearing ratio Loan capital 100 Total capital employed All figures in 000s Option A 2000 720 2720 100 68 17 Accept 68 2 or 68 17 3270 720 3990 Option B 2000 2000 100 49 14 Accept 49 1 or 49 14 3270 800 4070 Mark as 2 2 N B please be especially careful when marking these responses Candidate own figure rule OFR applies Often to check the candidate s response the examiner must refer to the balance sheet produced by the candidate in part ii identify the loan capital and or total capital employed from the balance sheet and then calculate what the gearing ratios should be using these figures Award 1 for working and 1 for the correct answer Award up to a maximum of 2 for each option 4

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8 c M15 3 BUSMT SP2 ENG TZ0 XX M Examine the disadvantages of Option A and of Option B as sources of finance for the purchase of the new equipment The disadvantages of Option A which will increase NK s gearing ratio are that NK s profitability after tax and interest will be affected because of the interest expense on the new loan NK s cashflow will be affected by the debt service payments which is money that could have gone into other needs increased working capital requirements other capital expenditures etc The disadvantages of Option B which will lower NK s gearing ratio are that ownership of the business may be affected the 800 000 may come from new investors thus diluting ownership for current owners or if the 800 000 comes from existing owners it may change the percentage ownership of existing shareholders Financing capital expenditures with capital rather than equity increases the total equity amount which makes it more difficult to maintain return on equity ratio for investors Overall the use of equity for capital is the safest option but has the potential for lower reward The use of debt is the riskier of the two options but the chance for very strong investor returns exists with the debt financing option Accept any other relevant examination In the context of this response a balanced response is when a candidate address the disadvantages of both types of financing If a candidate addresses only one type award a maximum of 3 Marks should be allocated according to the markbands on page 3 5

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9 2 a M15 3 BUSMT SP2 ENG TZ0 XX M Describe ET s current distribution channel and the channel recommended by the marketing consultant 4 ET s current distribution channel is B2C shipment directly from the production facility to the purchaser In e commerce terms it is pure play meaning that from a consumer s point of view ET has only an Internet presence It has no physical stores to which consumers can go to see and experience the toys ET s proposed new distribution channel is by way of the toy parties This approach is somewhat unusual A typical integration of Internet commerce with a physical presence known as brick and click involves a retail store or locations with fixed addresses to which consumers can go The toy parties represent something different a physical presence of representatives of the company but not a permanent physical presence locations could change and the physical presence exists only when there is a party Mark as 2 2 Award 1 for identifying ET s current distribution channel Award 1 for describing it Candidates do not have to use the term pure play for 1 but they do have to convey the idea that to consumers ET currently only has an Internet presence Award up to a maximum of 2 Award 1 for identifying ET s new distribution channel toy parties Award 1 for describing it Candidates do not have to use the term click and brick but they do have to provide some additional descriptor for a second mark That descriptor could emphasize that there is now an intermediary between ET and the customers sales representatives or that ET now has a one level distribution system in addition to its continued B2C online sales However if the description is of the promotional and marketing technique features of toy parties children can play with the toys etc do not accept this as a relevant descriptor as it is not describing distribution Award up to a maximum of 2 b i Using Table 1 calculate ET s net profit margin for 2014 show all your working Sales fixed costs variable costs net profit before interest and tax 300 000 121800 125 000 53 200 53200 100 17 73 Accept 17 7 or 17 8 300 000 Award 1 for working and 1 for the correct answer maximum of 2 Award up to a 2

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10 ii M15 3 BUSMT SP2 ENG TZ0 XX M Using Table 2 calculate ET s forecasted net profit margin for 2015 show all your working 2 Sales fixed costs variable costs net profit before interest and tax 352 000 180 000 128 000 32 000 32 000 100 Accept or 352 000 Award 1 for working and 1 for the correct answer maximum of 2 iii Award up to a Comment on the change in net profit margin from 2014 actual and 2015 forecasted Net profit margin fell from a healthy 17 73 to a negative 5 68 The biggest reason for the decrease is the increase in fixed costs which rose from 121 800 to 180 000 The combination of lower prices and sales commission also had an impact as variable costs as a percentage of sales increased from 41 67 to 54 55 ET will have to increase volume if it is to return to profitability or determine some ways to cut its variable costs Award 1 if the candidate makes an assertion about the change using figures to support their response Award 1 for each relevant commentary on the situation for example the increase in fixed costs the increase in variable costs the need for greater volume etc Award a maximum of 3 N B a candidate could make a relevant comment and earn a mark without using figures For example compare The forecasted net profit margin for 2015 is lower than the net profit margin for 2014 possibly because of the higher promotion costs and lower prices This response would receive 1 Versus The forecasted net profit margin of for 2015 is lower than the net profit margin of 17 73 for 2014 possibly because of the higher promotion costs and lower prices This response would receive 2 A comment as basic as the net profit margin declined from 17 73 to would receive only 1 despite having figures and a basic valid assertion This is because the candidate is just putting into words the basic differences in the two figures 3

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11 c M15 3 BUSMT SP2 ENG TZ0 XX M Using relevant data from Table 2 prepare an annual cash flow forecast for ET for 2015 Receipts Cash sales revenue Total receipts Payments Fixed costs Raw materials Sales commissions Other variable costs Total payments Net cash flow Opening balance Closing balance 4 352 000 352 000 180 000 128 000 32 000 32 000 372 000 37 000 17 000 Award 1 if the candidate has some idea of an annual cash flow forecast but otherwise has numerous errors Award 2 if the cash flow has two or more errors or has a largely inaccurate format Award 3 if it is largely formatted correctly and or has one error Award a maximum of 4 for a correctly formatted and mathematically accurate cash flow forecast N B an example of how a candidate can demonstrate some idea is if they produce a table with many errors balance sheet figures wrong order mathematical errors etc but still conveys some sense of opening cash balance and a closing cash balance d Examine two reasons why ET originally charged higher prices for its toys than those charged by its competitors Possible reasons why ET s toys were more expensive than their competitors include ET hoped that if it priced its toys higher consumers would think of them as of higher quality or of better value educational The parents who purchase ET s toys are loyal believe in the product and therefore are willing to pay premium pricing ET has a small scale of operations Compared to most toy manufacturers ET is very small and may not enjoy the economies of scale that other manufacturers do Accept any other relevant reason and examination N B Award 1 for each reason identified up to 2 Award an additional 1 if the candidate provides a reasonable examination Award 1 if the candidate has one reason that is primarily psychological brand perception customer loyalty etc and the second reason is real based upon possible higher per unit cost because of the small scale of operations Marks should be allocated according to the markbands on page 3 5

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12 M15 3 BUSMT SP2 ENG TZ0 XX M Section B 3 a Describe one type of below the line promotion that SP may use to promote its running clinics 2 Types of below the line promotion include direct marketing catalogues email flyers mail online display ads and popups promotional letters text messages etc personal selling of which there are many varieties public relations sponsorship charities sports events etc celebrity appearance at events or in the store accept any other relevant below the line promotion As this question is about below the line promotion rather than below the line advertising reward for discounts but do not reward logos or slogans N B do not accept word of mouth as a type of below the line promotion Award 1 when a candidate correctly identifies a type of below the line promotion and 1 for describing it Award up to a maximum of 2 b Explain two reasons why SP supports the local running community Reasons why SP would support the local running community include USP The main reason SP supports the local running community is to develop a local customer base SP s USP is not price Runners in the Santa Fe area can purchase running shoes more cheaply online Though the stimulus does not say so they can probably also buy shoes cheaper at chain sporting goods store like Foot Locker or Dick s Sporting Goods SP simply cannot compete on price so its USP is based upon the idea that SP supports and fosters a whole community of people with the same interest Buying from SP means joining a community and the community is self reinforcing because everyone has a common interest running Promotion publicity One method of supporting the running community is having events like local races and especially its annual event Race to the Top By hosting such events which garner publicity SP s marketing reaches beyond the immediate community of its customers Local events wind up being reported on local TV so even non runners come to know the store and support the event Along with other sponsored events like other races and running clinics SP gets to be better known Other businesses will want to get involved and play some role in the event making it even bigger attracting more people Create sales opportunities The events probably lead to increased sales This is true of races but also of running clinics which probably attract people who are not runners they go to the clinic to learn about running If the clinic piques their interest SP has positioned itself to sell those people shoes Clinic participants could of course buy their shoes online and perhaps some do but others and perhaps even most would feel some loyalty obligation to SP to buy a pair of shoes from them Soon these customers are part of the running community 6

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13 M15 3 BUSMT SP2 ENG TZ0 XX M Purpose Another reason that SP supports the local running community is because its owners and manager and probably most of the staff really do believe that Running sustains life locally and globally One of many reasons small businesses are opened and exist is that the founder owners are genuinely interested in or have a passion for what the store does The owner founders are probably runners themselves as are probably the salespeople This would make sense because SP sponsors running events the staff would need to be knowledgeable about running and enjoy being at running events Brand Loyalty Events passion social connections and community all these would create a branded identity for SP even if selling products with their own brand names Nike Adidas Puma etc and build loyalty This is also true of giving special discounts to school aged children After buying shoes at SP when young possibly initially because of the discounts these children runners would join the SP community be grateful for past discounts and ongoing events and continue to patronize SP by buying their shoes even if more expensive Research Running clinics allow SP to work with its customers actually in the context of their use of its products This way SP staff can dialogue with customers to learn about their interests and wants In certain respects running clinics are like focus groups but in some ways even better Accept any other relevant reasons and explanations Mark as 3 3 Award 1 for each reason identified award 1 for explaining the reason and 1 for an explanation of the reason in context of the stimulus Award up to a maximum of 3 per reason If the reason is not framed in terms of a specific business concept with appropriate use of business vocabulary award a maximum of 2 per reason if the reason is relevant and well developed For a basic common sense answer with little development and virtually no use of business vocabulary award a maximum of 1 per reason

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14 c M15 3 BUSMT SP2 ENG TZ0 XX M Analyse the role of SP s vision statement In general the characteristics of a good vision statement include clarity brevity abstract and challenging tells the organization s purpose future oriented provides a goal implies a framework for strategic planning and thus a framework for measurable goals though such measurable goals would not be in the vision statement 1 Vision statements have as their intended audience all stakeholders in the business not just customers and employees SP s vision statement Running sustains life locally and globally contains some of the qualities of an effective vision statement but many are missing It is clear brief abstract and in some ways challenging and could well have some resonance with all stakeholders However it does not tell the purpose of SP it is not future oriented and has no explicit or implicit goal and thus provides no direct or indirect framework for strategic planning In many ways Running sustains life locally and globally is more like a slogan not unlike Campbell s Soup s slogan several decades ago Soup is Good Food That slogan was selling soup not Campbell s soup and was eventually dropped SP s vision statement is similar it is selling running not entering the running community of SP or buying shoes at SP because its customers get so much more than just shoes The attributes of a good vision statement will vary from author to author though in general most such lists share the characteristics listed above Candidates should have some knowledge of precise attributes of an effective vision statement and refer to them either in some form of list or embedded throughout their response Accept any other relevant analysis N B in the context of this question balance means that candidates address both the strengths of SP s vision statement and some of its weaknesses Marks should be allocated according to the markbands on page 3 1 Kelly Burke Characteristics of a Good Vision Statement integrated and paraphrased from various sources including the Academic Leadership University of Hawaii HILO Strategic Planning Committee Paper 07 11 January 12 2011 Retrieved from http hilo hawaii edu strategicplan documents SPC_07_11_vision_characteristics pdf 6 July 2014 5

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15 d M15 3 BUSMT SP2 ENG TZ0 XX M Advise the local authorities as to whether permission for SP s Race to the Top should be refused The Race to the Top event has both advantages and disadvantages for the local community whose interests the local authorities are to serve The main advantage is that it is a major local event that attracts large numbers of people garners media attention and we can reasonably infer promotes the local economy and fosters community spirit at least among the running community It is SP s flagship event thus benefitting one local business By supporting the event the local authorities would appear business friendly which could attract other businesses to the Santa Fe area In turn new businesses strengthen the economy A virtuous cycle of growth can be fostered The negatives include the negative attention the event garners from pressure groups worried about the image of Native Americans and about the environment around Starvation Peak Some people are more concerned about these types of issues than economic growth and local authorities have a responsibility to everyone in the community not just businesses Because the event is so big probably attracting local TV crews pressure groups probably stage protests onsite and get media attention Given that more and more people are focused on sustainability the fact that the Race to the Top event does some damage to the local environment may cast local authorities in a bad light if they support the event There is no correct answer to this question Candidates may be for or against Race to the Top What matters is the degree to which they support their position provide a balanced argument use business concepts and vocabulary and have a conclusion with sustained judgments Accept any relevant answer If the response is a one sided relevant approach with no discussion award a maximum of 4 One sided means that the candidates only recommends that the Race to the Top event should be stopped with no discussion of what benefits SP derives from it OR is only in favour of the event with no discussion of the disadvantages and negatives of hosting the event To earn a mark in the top markbands 5 6 or 7 a candidate must have a balanced response with a supported conclusion Marks should be allocated according to the markbands on page 4 7

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16 4 a M15 3 BUSMT SP2 ENG TZ0 XX M Identify one opportunity and one constraint for companies caused by demographic change Possible opportunities include To replace workers Some companies in countries with ageing populations might otherwise have great difficulty finding replacement employees who can be recruited from countries with more young people To lower costs of salaries or wages by replacing older workers with younger workers who in many contexts will have lower salaries than retiring employees To have new blood as younger employees with new innovative ideas join companies To diversify the workforce which leads to greater creativity Homogenous workforces experience lesser misunderstanding and conflict in the workplace Possible constraints include Cost of recruiting workers from other countries The lack of experience of younger workers recruited from countries with large numbers of young people Loss of experience depth of knowledge and wisdom about the company Though homogenous workforces experience lesser misunderstanding and conflict in the workplace such workplaces are less creative and innovative N B though the content of the question suggests an opportunity and constraint with respect to human resources candidates may approach the question differently Doing so is fine as long as the response is relevant and makes sense For example because of an ageing population an opportunity may exist if the company revises its marketing mix and starts to target an older population Accept any other relevant opportunity or constraint Mark as 1 1 Award a maximum of 2 2

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17 b M15 3 BUSMT SP2 ENG TZ0 XX M Comment on one potential communication problem for a company with a diverse international workforce Communication problems for a company can exist at a number of levels due to a diverse international workforce and include Differing levels of competence in the language of the business English in an English or American company French in a French company Japanese in a Japanese company etc A problem here is when one employee cannot decode a basic verbal message whether written or spoken or cannot communicate sufficiently well in the company s language of business to provide precision and subtlety Different cultural meanings even when the words have been properly decoded In some cultures to say The meeting starts at 2 00pm means it starts at exactly 2 00pm In other cultures the same message means around 2 00pm Different meanings attached to various types of non verbal communication hand gestures bowing hand shaking etc In a diverse workforce someone can make a hand signal and without intending to give offense at someone from another culture where such a gesture has negative connotations Companies that engage in international recruitment are probably multinationals and communication could have problems due to the mechanics of international communication time zones reliance on different telephone companies and internet providers etc Accept any other relevant communication problem N B remember that the question is about communication not agreement or decision making A response such as a diverse workforce may have difficulty agreeing because of different values backgrounds cultures is not addressing the issue of communication per se which is what the question requires Award 1 for identification of a communication problem and 1 for some relevant commentary thereon Award a maximum of 2 2

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18 c M15 3 BUSMT SP2 ENG TZ0 XX M Explain the statement difficulties in meeting operational objectives of recruitment prevent many companies from meeting their strategic objectives Organizations have tiers of objectives strategic objectives are long term and the fate of companies usually depends on wise strategies Below strategic objectives are tactical medium term and operational short term Even though operational objectives are of less gravitas than strategic and typically are made by middle and lower managers of a company failure to meet them can weaken a business s performance significantly In the case of the stimulus difficulties in meeting operational objectives of recruitment prevent many companies from meeting their strategic objectives means that some companies have a strong long term vision in terms of their marketing mix and their ability to bring it properly to the market provided that they can recruit and retain the right quality and quantity of workers and employees In some cases companies with an otherwise very sound vision cannot find the right employees which compromises the business s ability to meet their long term strategic objectives Award 1 if the candidate shows an understanding of strategic objectives and 1 if the candidate shows some understanding of tactical and or operational objectives Award an additional 1 2 for application to the stimulus providing a precise explanation of the statement in the question Award a maximum of 4 4

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19 d M15 3 BUSMT SP2 ENG TZ0 XX M Analyse one strategy that a global company could adopt for developing future human resources you may refer to a global company that you have studied The major options for developing a plan for future human resources include those listed below Analysing current employees supply skill and number Analyse number and skills of locally available labour in the different local contexts where the company operates Forecasting demand for employees based upon o estimates of mid and senior managers the number of employees that will be needed o estimates of labour turnover o past experiences o the skills that will be needed o worker productivity Developing a program for internal recruitment Developing training programs Developing a program for external recruitment o local o national o international Accept other relevant options Candidates should discuss at least one of the options above in some depth or discuss two in lesser depth To receive more than 3 candidates must show balance In this context balance means the strengths and limitations of the approach adopted Though in practice most global companies are going to rely on some combination of all of the approaches some companies try very hard to be known in the market for certain types of human resources For most of its history NationsBank now Bank of America was famous for recruiting internally for mid level and senior positions As a result many talented people wanted to work there because they knew they would have opportunities to be promoted gain more responsibility and make more money A drawback to this approach is that sometimes promoted employees could not perform in their new roles whereas an externally recruited senior person might have fared better Qatar Airways very consciously recruits externally and globally The airline is trying to be a global company and wants its employees to be from around the world A drawback to this approach is that it is expensive many problems of language and communication can occur and diverse workforces sometimes can have conflicts based upon cultural differences Very large companies with huge workforces like ExxonMobil Walmart and large auto manufacturers often forecast demand for future employees using all of the techniques noted above Because they have such huge numbers of employees statistical modelling and quantitative analysis can work with a high degree of reliability However no company can know the future and all of the methods used for forecasting future employees can fail because of changes in the company s fortunes unexpected political factors and changing technologies Accept any other relevant analysis Marks should be allocated according to the markbands on page 3 5

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20 e M15 3 BUSMT SP2 ENG TZ0 XX M Discuss the significance of changes in international labour mobility The significance of changes in international labour mobility include More workers people are able to find work that matches their skill set and ability More companies are able to fill positions with appropriate personnel Managers and shareholders may welcome immigrant workers who fill crucial voids People may resent immigrants taking jobs Young emigrants moving for work lose contact with their home cultures Many rural areas are losing young people who move to cities in search of work Workplaces and cities are becoming diverse which fosters creativity Diversity increases the likelihood of cultural conflict Emigrant workers often find economic opportunity Emigrant workers are often separated from their families and often lack political rights in the country to which the move Accept other relevant implications of changes in labour mobility A 7 response would consider at least two positive outcomes of changes in labour mobility and two negative or challenging outcomes of changes in labour mobility and have a conclusion or judgment If less than two positives or less than two negatives award a maximum of 5 If the candidate discusses two or more positive outcomes of changes in labour mobility and two or more negative or challenging outcomes of changes in labour mobility but does not have a conclusion or judgment award a maximum of 4 Marks should be allocated according to the markbands on page 4 7

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21 a Define the term product portfolio 2 Product portfolio refers to the variety or range of products services or the particular mix of products services offered by a business Businesses usually have a variety of products in order to spread risks or attract more target markets 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 similar to the answer above For only a relevant example or application to the stimulus award 1 Draw and label all elements of the Ansoff matrix 2 The Ansoff matrix is a tool used to identify possible growth strategies according to the product is it existing or new and the market is it existing or new It is represented as follows Product Existing New Existing i Market penetration Product development New b Market development Diversification Market 5 M15 3 BUSMT SP2 ENG TZ0 XX M Award 1 if the candidate produces something indicating some idea of what the Ansoff matrix is but with one or more error Award a maximum of 2 for a correctly drawn and labelled Ansoff matrix

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22 ii M15 3 BUSMT SP2 ENG TZ0 XX M Explain one advantage and one disadvantage for Coca Cola in India of using the Ansoff matrix as a decision making tool 4 Advantages of using the Ansoff matrix include provides an analytical framework for making strategic marketing decisions highlights the various degrees of risk associated with strategic direction of marketing once a quadrant of the matrix is identified it points to marketing tactics that can be used Disadvantages of using the Ansoff matrix include like all analytical tools it is only a tool and may be misused it tends to simplify a complex problem sometimes too much It cannot predict actual events and thus can be misleading Accept any other relevant advantage disadvantage with an explanation N B something conceptually equivalent to the own figure rule OFR has to be used here if the candidate gets 5 b i wrong by drawing the wrong decision making tool but then in 5 b ii accurately or partially explains an advantage or disadvantage of the tool the candidate has used Mark as 2 2 Award 1 for identification of an advantage disadvantage and an additional 1 for its explanation If no reference is made to Coca Cola in India award a maximum of 2 c With reference to Coca Cola analyse the role played by multinational companies in the global business environment The role of multinational companies MNCs in the global business environment is mainly seen in terms of economic activity They contribute to economic development as they invest in countries around the world eg when Coca Cola entered India it brought capital a factor of production into the Indian economy Through outsourcing they create employment eg Apple s outsourcing to China brings employment to millions in China However the role of MNCs is also criticized as they contribute to the standardization of products eg Johnson Johnson sells the same soaps and baby shampoo all around the world and are sometimes accused of unethical practices eg sweatshops factories in Vietnam manufacturing goods for companies such as Nike Accept any relevant analysis If the response is generic award a maximum of 3 Marks should be allocated according to the markbands on page 3 5

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23 d M15 3 BUSMT SP2 ENG TZ0 XX M Discuss the costs and benefits to Coca Cola India of e commerce Some of the benefits that e commerce may bring to Coca Cola India include the following A reach to a wider customer base making more sales possible eg party orders since an online order is taken and home delivery made Comfort and convenience building brand loyalty exploring the benefits of shopping through mobile and internet networks is widely growing across the globe If e commerce is to be added to an already functioning organization of such a high scale the cost of buying the technology is usually not very high Transaction costs are relatively low There is no issue with customers being put off by the intangibility of buying this product over the net since this merchandise does not require sensory perceptions or experience during the purchase process and customers already know what to expect Accept any other relevant benefit However some of the costs to Coca Cola India include Security issues consumers have many concerns over privacy and security when dealing with online businesses credit debit card numbers may be stolen personal information may be hacked Costs of setting up the technology and systems Coca Cola India will have to set up distribution channels assuring deliveries at all hours often there may be lean periods where orders are less compared to weekends and festive periods Some hostility may develop among Coca Cola India and retailers and supermarkets as they may fear losing larger orders to the online store run by Coca Cola India Accept any other relevant cost Accept any relevant discussion To achieve the top markband both the costs and benefits need to be discussed If the response is one sided award a maximum of 4 Marks should be allocated according to the markbands on page 4 7

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N15 3 BUSMT HP1 ENG TZ0 XX Business and management Higher level Paper 1 Thursday 19 November 2015 afternoon 2 hours 15 minutes Instructions to candidates yyDo not open this examination paper until instructed to do so yyA clean copy of the business and management case study is required for this examination paper yyRead the case study carefully yySection A answer two questions yySection B answer the compulsory question yySection C answer the compulsory question yyA calculator is required for this examination paper yyClean copies of the business and management formulae sheet and discount tables are required for this examination paper yyThe maximum mark for this examination paper is 80 marks 6 pages 8815 5011 International Baccalaureate Organization 2015

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2 N15 3 BUSMT HP1 ENG TZ0 XX Section A Answer two questions from this section 1 a Describe one way in which a problem with quality control line 115 could affect LadyA 2 With reference to LadyA describe one reason for identifying target markets 2 b c Explain one benefit to the local school and one benefit to Mrs Carroccio of providing training for Mrs Carroccio line 13 4 d 7 Analyse the impact of technological change on Alejandra and her business 2 a Describe one method of primary market research and one method of secondary market research that could be useful to LadyA 4 b With reference to Mr Carroccio explain two reasons for setting up a business 4 c Analyse the importance of branding for Alejandra 7 3 a Describe two benefits to Mr Carroccio of owning his shoe repair business as a sole trader b 4 Using the additional information below calculate i the average rate of return ARR for setting up Mr Carroccio s shoe repair business show all your working 2 ii the payback period for setting up Mr Carroccio s shoe repair business show all your working 2 Using your answers to part b and information contained in the case study analyse the issues that Mr Carroccio faced when he set up his shoe repair business c Additional information Selected data for setting up Mr Carroccio s shoe repair business Set up cost 9000 Net returns per year for 5 years 3000 7

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4 N15 3 BUSMT HP1 ENG TZ0 XX Section C Answer the compulsory question from this section 5 Gavin Pratt has been appointed as LadyA s International Marketing Director Item 1 He was selected for his excellent sense of style and his knowledge of the LadyA brand However he has limited marketing experience Alejandra decided to reject Option 1 and Option 3 She identified two strategies for implementing Option 2 lines 147 152 The new products would be manufactured using the same manufacturer in Malaysia that produces LadyA s perfume and cosmetics Option 2 would require the introduction and use of business to customer B2C e commerce distribution channels Sales generated through B2C e commerce are growing rapidly Item 2 Implementation strategy A Option 2 through internal growth create an entirely new marketing department for LadyA The marketing department would organize international promotion for LadyA products set up distribution channels and negotiate with international agents wholesalers and major retailers around the world Once the global brand is developed the marketing department would develop B2C e commerce Implementation strategy B Option 2 through external growth take over Fabco an international marketing business Fabco has proven experience in organizing international promotion which could be applied to LadyA products Fabco already has distribution channels with international agents wholesalers and retailers outside the United States US and has experience in developing and using B2C e commerce However Fabco has recently been accused of some unethical business practices Item 3 and has never worked with media stars such as LadyA Alejandra asked Gavin to research both implementation strategies so that she can make a decision as soon as possible As part of Gavin s research he has obtained some financial data from Fabco Item 4 a Identify two features of a wholesaler 2 b Using relevant data from Item 4 calculate the acid test quick ratio X for 2014 no working required 1 c Using Item 4 and your answer to part b comment on the changes in Fabco s liquidity 6 d Analyse the relationship between the product life cycle investment and the likely profits for LadyA 9 e Using information contained in the case study and Items 1 4 recommend whether Alejandra should choose strategy A or strategy B in order to implement Option 2 12 Additional information is on the following pages

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N15 3 BUSMT HP1 ENG TZ0 XX 5 Additional information Item 1 Social networking responses to Gavin Pratt s appointment LadyA News flash Gavin is my new International Marketing Director Gavin Wow what an opportunity We will conquer the world Fashion journalist How could someone like Gavin with no marketing experience be given this opportunity Financial journalist He helped make LadyA a sensation in the US now the world Anonymous LadyA employee If you think LadyA is difficult to work with wait until you meet Gavin Item 2 B2C e commerce sales worldwide 2012 2017 in billions Asia Pacific North America Europe South America Middle East and Africa Total 2012 301 380 319 38 21 1059 2013 384 431 362 48 27 1252 2014 525 483 405 58 34 1505 2015 681 538 447 65 40 1771 2016 856 598 483 71 46 2054 2017 1053 660 518 75 51 2357 Source Data www emarketer com Item 3 News report on Fabco 1 December 2014 This year Fabco s performance has been outstanding in Asia Sales and profits have grown faster than many similar businesses in the region Strong performance in Asia has enabled Fabco to negotiate a business relationship with The Cathy Group a large chain of retail stores in Asia However concern is growing that Fabco s business practices are not always ethical Fabco sometimes ignores minimum wages and has suppliers who do not practice corporate social responsibility CSR Customers are showing a very high level of satisfaction with Fabco However some Fabco customers in Europe have reported problems with their online orders and accounts Additional information continues on the following page Turn over

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3 N15 3 BUSMT HP1 ENG TZ0 XX M The markbands on pages 3 6 should be used where indicated in the markscheme Section A Q1 d Q2 c Q3 c Level descriptors Marks 0 7 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the case study 3 5 A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the case study not just to the name of the organization At the lower end of the markband responses are mainly theoretical 6 7 A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the case study

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4 N15 3 BUSMT HP1 ENG TZ0 XX M Section B Q4 d Level descriptors Marks 0 8 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the case study 3 4 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the case study not just to the name of the organization The response is mainly theoretical 5 6 7 8 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the case study are made at places in the response A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the case study are made throughout the response

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5 N15 3 BUSMT HP1 ENG TZ0 XX M Section C Q5 d Level descriptors Marks 0 9 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 3 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the case study and or the extension material within Section C 4 6 A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the case study and or the extension material within Section C not just to the name of the organization At the lower end of the markband responses are mainly theoretical 7 9 A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the case study and or the extension material within Section C

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6 N15 3 BUSMT HP1 ENG TZ0 XX M Section C Q5 e Level descriptors Marks 0 12 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 3 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of synthesis of information from the case study the extension material in Section C and where applicable from other responses within Section C Information is merely lifted and copied into the response No evidence of judgments and or conclusions No reference is made to the information in the case study and the extension material within Section C 4 6 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of synthesis of information from the case study the extension material in Section C and where applicable from other responses within Section C Information is merely lifted and copied into the response Evidence of judgments and or conclusions that are no more than unsubstantiated statements Limited reference is made to the information in the case study and the extension material within Section C The response is mainly theoretical 7 9 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology At places in the response information from the case study the extension material in Section C and where applicable from other responses within Section C is synthesized and integrated to provide a basis for analysis and evaluation A response that includes judgments and or conclusions that have limited support and are underpinned by a balanced analysis Explicit references to the information in the case study and the extension material within Section C are made at places in the response 10 12 A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response Information from the case study the extension material in Section C and where applicable from other responses within Section C is proficiently synthesized and integrated to provide a basis for analysis and evaluation A response that includes judgments and or conclusions that is well supported and underpinned by a thorough and balanced analysis Explicit references to the information in the case study and the extension material within Section C are made throughout the response

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7 N15 3 BUSMT HP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section A 1 a Describe one way in which a problem with quality control line 115 could affect LadyA 2 Quality control is intended to ensure that products are being manufactured to an acceptable standard Poor quality problems with quality control can lead to dissatisfied customers loss of future sales poor quality perfumes etc could affect LadyA s reputation as well as the reputation of the perfumes negative impact on brand image Accept any other relevant problem Award 1 for a basic description that conveys knowledge and understanding Award 2 for a full clear description that conveys knowledge and understanding in relation to LadyA b With reference to LadyA describe one reason for identifying target markets The market segment that a particular product is aimed at is known as the target market LadyA s target markets were English speakers mostly teenage girls and young women from the United States US many Hispanics and some Spanishspeaking Americans For LadyA it is important to know her target market It provides the business a clear picture of the consumers and their profile in the target market It could include age gender income levels social class Knowledge of the target market helps the business make the right marketing mix decisions to provide the right product service meeting the taste and preference of the market it is aimed at the right price the consumer will be willing to pay at the right place using the most appropriate promotion strategy and offers that are likely to attract the specific market for whom the product service is designed Knowing the target market will lead to less wastage of resources in all the marketing mix Accept any other relevant reason with reference to LadyA Award 1 for a basic description that conveys knowledge and understanding Award 2 for a full clear description that conveys knowledge and understanding in relation to LadyA 2

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8 c N15 3 BUSMT HP1 ENG TZ0 XX M Explain one benefit to the local school and one benefit to Mrs Carroccio of providing training for Mrs Carroccio line 13 4 Aim of training is to improve the performance of employees It can lead to the following benefits Better performance by Mrs Carroccio as she is more confident from the new skills She may also be more motivated to do her job well as the school is investing in her The school could become reputed for being a good employer and hence it may become easier to attract people to apply for jobs It could improve the school s performance as Mrs Carroccio is performing better Accept any other relevant benefit N B Accept one benefit that is applied to both the school and Mrs Carroccio N B Do not accept an answer that refers to the charity where Mrs Carroccio learned English The question refers to the local school and Mrs Carroccio Mark as 2 2 Award 1 for the identification of a relevant benefit for the school Mrs Carroccio and 1 for an explanation of the benefit in relation to the school Mrs Carroccio Award a maximum of 2 d Analyse the impact of technological change on Alejandra and her business Some technological changes have had a positive impact and may be regarded as opportunities others a negative impact so they may be regarded as threats The availability of online file sharing software followed by emergence of MP3 players smartphones video hosting websites became popular Younger generation teenagers a major target market of LadyA relied heavily on these new technologies to get their music and videos Online file sharing of copyrighted material although often illegal was widely used This directly affected the sales of CD albums and profitability of music videos Production of online videos now had to be done by the artist themselves this was expensive and did not generate any direct revenue it denied artists and musicians their royalties LadyA had to find new ways to generate revenue She had to maintain herself as a media personality This involved strengthening her brand identity with an image that would fit the expectations of her target market LadyA used technology social media networks which her target market used to bond and communicate with them Accept any other relevant application analysis If the answer is not applied to LadyA award a maximum of 3 If the answer is limited to knowledge and understanding of case study material award a maximum of 4 If the answer lacks depth of analysis balance award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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9 2 a N15 3 BUSMT HP1 ENG TZ0 XX M Describe one method of primary market research and one method of secondary market research that could be useful to LadyA 4 Methods of primary market research could include surveys and questionnaires observation focus groups Methods of secondary market research could include media reviews market intelligence reports government publications on demographics and population census income levels business websites do not accept just internet or websites data about competitors Accept any other relevant method of primary secondary market research N B Do not accept sampling Mark as 2 2 N B Award a maximum of 3 overall if the answer is not applied to LadyA Award 1 for each correct and relevant primary secondary method of market research identified and 1 for an appropriate description of each of these Award up to a maximum of 2 b With reference to Mr Carroccio explain two reasons for setting up a business Reasons for Mr Carroccio setting up a business include economic insecurity encourages in people the need to be self reliant financial motivation security earning money desire for independence be his own boss possibilities of higher income in the long term as opposed to being employed make use of personal interests and skills put creative ideas into practice Accept any other relevant reason Mark as 2 2 N B Award a maximum of 3 overall if the answer is not applied to LadyA Award 1 for each relevant reason identified and 1 for its development Award up to a maximum of 2 per reason 4

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10 c N15 3 BUSMT HP1 ENG TZ0 XX M Analyse the importance of branding for Alejandra Branding is an essential part of marketing In this case the brand is LadyA First of all an appropriate brand name is important to match the expectations of the target market The brand will have its own related customer perception as customers associate the brand with certain qualities perception This was the reason Alejandra was very careful about what products she endorsed line 107 as she expected each of these to strengthen her brand identity as a beautiful mainstream American with Hispanic passion and intensity Branding is crucially important to Alejandra as it seeks to provide differentiation as well as a unique identity among other female music artists and film stars Under the LadyA brand Alejandra offered her own product line of perfumes and cosmetics targeted at teenage girls and young women sold in department stores in the US Given that Alejandra is successful in establishing the LadyA brand to the point that large numbers of consumers know the name and logo the company will have a much easier time when introducing new products Brands when effectively managed can have a longer product life cycle As long as value is associated with a brand Alejandra can add other products and lines such as LadyA handbags LadyA lingerie LadyA shoes Option 2 LAM will also enjoy the free advertising that comes with consumers using LadyA handbags or wearing shoes with its easily identifiable logo symbols Branding also enables loyalty which is important as most people tend to keep buying the same products once they identify with them Using her first brand name Lady Alejandra Alejandra hopes to attract patronage in the South American markets Option 1 which generally accept older female musicians and media stars The Spanish speaking markets will be addressed through methods such as a concert tour as well as through music downloads films product endorsements magazine covers etc There is also the option of Alejandra re branding herself to reposition her image associating herself with noble causes such as malnutrition homelessness human trafficking Option 3 There is a negative side to a strong brand identity If one of its products has problems the problem product can affect the entire brand It can be expensive to establish and maintain a brand Brands can go out of date This brand name needs to be consistent with the rest of the marketing mix for Alejandra and her products It may prevent development of individual product characteristics for example perfume versus handbags Accept any other relevant analysis N B Allow candidates to use the name Alejandra and LadyA interchangeably as long as they recognize that LadyA is the brand If the answer does not relate to LadyA Alejandra award a maximum of 3 If the answer is limited to only one aspect award a maximum of 4 If the answer lacks depth of analysis balance award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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11 3 a N15 3 BUSMT HP1 ENG TZ0 XX M Describe two benefits to Mr Carroccio of owning his shoe repair business as a sole trader 4 Benefits to Mr Carroccio include single ownership and control of the business not answerable to anyone all profits and losses belong to the single owner alone all decision making powers of the business technically vested with the single owner Accept any other relevant benefit Mark as 2 2 N B Award a maximum of 3 overall if the answer is not applied to Mr Carroccio or a shoe repair business Award 1 for each relevant benefit identified and 1 for its development Application could refer to Mr Carroccio s personal circumstances or that a sole trader is a typical set up of a shoe repair business Award up to a maximum of 2 per benefit b Using the additional information below calculate i the average rate of return ARR for setting up Mr Carroccio s shoe repair business show all your working ARR net return profit per annum capital outlay cost 100 2 3000 5 9000 5 100 13 3 9000 Award 1 for working and 1 for the correct answer ii the payback period for setting up Mr Carroccio s shoe repair business show all your working Payback It takes 3 years 36 months to earn 9000 at 3000 per year Award 1 for working and 1 for the correct answer 2

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12 c N15 3 BUSMT HP1 ENG TZ0 XX M Using your answers to part b and information contained in the case study analyse the issues that Mr Carroccio faced when he set up his shoe repair business ARR 13 3 allow OFR on this figure could be much better than any interest he could get on his savings Could it be even better if you extend the appraisal beyond 5 years What if the business was slow to start Payback He has not borrowed so is the payback important 3 years allow OFR on this figure seems a fairly long time Both measures present a favourable picture but how realistic is the data What other factors need to be considered It may have been his only opportunity to use his limited savings to make a secure life in the US How would he establish a market He is new to the US Other marketing issues what price what marketing can he do presumably limited What competition was there presumably established businesses New businesses find it difficult to get loans indeed he was turned down Difficult to start with limited finance Accept any other relevant analysis N B Allow candidate own figure rule OFR from their calculations to part b If the answer only uses case study material or only uses answers to part b ratios award a maximum of 3 If limited use of case study ratios award a maximum of 4 If the answer lacks depth of analysis balance award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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13 N15 3 BUSMT HP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section B 4 a The production of LadyA perfume and cosmetics was outsourced lines 113 114 Describe two advantages to LadyA of outsourcing Possible advantages include lower costs wages and other costs are likely to be lower in Malaysia than the US can concentrate on core activities no expertise in manufacturing outsourcing firm may have special skills and experience spreads the risk established producer Accept any other relevant advantage N B Mentioning LadyA Malaysia is not sufficient application for 3 4 without development Award 1 2 for a basic answer that shows knowledge of the concept of outsourcing Award 3 4 for an answer which clearly describes the concept of outsourcing with effective application to LadyA No context award a maximum of 2 4

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14 b N15 3 BUSMT HP1 ENG TZ0 XX M Explain two reasons why Alejandra s objectives might have changed over time It is difficult to separate the individual from LadyA the business and Alejandra so we must allow either or both as valid not attending university building a singing career creating a brand image becoming a media personality launching her own product range her age fashion technology market development Factors that influence these changes are Alejandra changed her view as she got older most notably once she reached her late thirties and as she became more successful Success brought the opportunities to try new things and to develop herself and the business Alejandra had to respond to the world around her Opportunities came along which first led her to her singing career and then onto films and magazines The fact that the music industry means older stars struggle and this forced her to rethink what she wanted Accept any other relevant explanation N B Accept personal objectives since the question does not specify business objectives Award 1 2 for a basic answer that shows knowledge of the concept of objectives Award 3 4 for an answer which clearly explains the concept of changing objectives in context For 4 there has to be effective application to Alejandra No context award a maximum of 2 4

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15 c N15 3 BUSMT HP1 ENG TZ0 XX M Explain two difficulties in valuing LadyA s financial assets 4 Assets can be tangible or intangible there may be a question mark over stocks if these consist of physical CD albums and videos that can no longer be sold but these are unlikely to be owned by LadyA unless she has her own recording film company how do you value the brand name LadyA It is an intangible asset which are always difficult to value what is the worth of such things as the online videos and music that are freely available but nonetheless generate revenue for the business through the sales of merchandise etc what is the worth of the product endorsements which may generate further interest and revenues Would LadyA own assets such as buildings equipment etc Accept any other relevant difficulty Award 1 2 for a basic answer that shows knowledge of valuing assets Award 3 4 for an answer which clearly explains difficulties of valuing assets in context For 4 there has to be effective application to Alejandra LadyA No context award a maximum of 2 d Evaluate Option 1 lines 139 146 as a strategic option for LadyA Possible benefits growth through a new market easy market to develop ready made Spanish speaking fans more used to older stars economies of scale shared production marketing costs etc type of extension strategy which would help extend life of brand increasing future cash flows further enhanced brand name Possible problems risks no experience experience all in US will US experience transfer Accept any other relevant response with substantiation N B Comparing Option 1 with the other option eg By using Ansoff or Porter techniques is a useful means of evaluation but it is not necessary A general evaluation such as the use of SWOT or Ansoff or Porter etc without context award a maximum of 3 A one sided evaluation such as only benefits or problems award a maximum of 5 An evaluation without a balanced conclusion award a maximum of 6 Marks should be allocated according to the markbands on page 4 8

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16 N15 3 BUSMT HP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section C 5 a Identify two features of a wholesaler 2 Possible features of a wholesaler include they are intermediaries in the supply chain they buy in bulk from the producers they break bulk and sell to retailers they can improve the efficiency of the supply chain Award 1 for each correct feature identified up to a maximum of 2 b Using relevant data from Item 4 calculate the acid test quick ratio X for 2014 no working required Acid test quick ratio ATR 6 0 5 current assets stocks current liabilities 4 6 0 217 allow rounding accept 0 2 or 0 22 N B Do not accept 0 21 or 0 2 million Award 1 for the correct answer no working required 1

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17 c N15 3 BUSMT HP1 ENG TZ0 XX M Using Item 4 and your answer to part b comment on the changes in Fabco s liquidity Comments could include ATR fallen hugely Major liquidity problem likely Current ratio is also falling to below what is usually regarded as acceptable Current liabilities rising faster than sales which is a worry Whether it is creditors or overdraft it is a worry particularly as overall borrowing is rising see gearing Very large increase in stocks without corresponding change in other current items N B Use candidate own figure rule OFR from b in relation to comments N B Disregard discussion of other ratios Award 1 2 for general comments on liquidity ratios liquidity without reference to data Award 3 4 for simple comments limited to either the current ratio and or the acid test ratio and or makes use of relevant data from Item 4 Award 5 6 for comments that refer to changes in both of the liquidity ratios and their components Award 6 for use of both liquidity ratios and development of the idea that liquidity is getting worse Commentary that ignores changes is limited to 3 6

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18 d N15 3 BUSMT HP1 ENG TZ0 XX M Analyse the relationship between the product life cycle investment and the likely profits for LadyA Product life cycle is a difficult concept to apply however in LadyA s case Her singing career went through most of the stages of the cycle reaching maturity Her venture into the Spanish speaking market could be seen as an extension strategy Her branding as LadyA was a promotional strategy in the growth stage to maintain growth At one stage technology such as online video hosting websites was used as an extension strategy presumably to extend the life or was it to promote growth Her film and personality career seemed to follow behind her singing career and then declined possibly because of her age Products were launched and grew and there are now plans to extend the range of products and markets maintaining the products in a growth stage Is this an extension strategy The suggested complete rebranding seems like an eventual product re launch Each of the above has required an investment The singing career seemed to need little financial investment but the emphasis was on the creation of a brand through clothes and image Her venture into Spanish speaking markets also involves investment in the brand name Costs were also involved in the perfume and cosmetics ranges but was most of the investment by the outsourced businesses The relaunch has an investment in the form of an opportunity cost There is little reference to profits in the case study However it is likely that without extension strategies profits would not be as large as they have been There is no major investment by LadyA relative to earnings so the investments will have limited impact on the profits Accept any other relevant analysis of product life cycle investment and profits An answer that analyses only two of product life cycle investment profits award a maximum of 7 An answer limited to one of product life cycle investment profits award a maximum of 4 An answer without reference to LadyA award a maximum of 3 For 8 9 there has to be some linkage between the three concepts of the product life cycle investment and likely profits in context Marks should be allocated according to the markbands on page 5 9

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19 e N15 3 BUSMT HP1 ENG TZ0 XX M Using information contained in the case study and Items 1 to 4 recommend whether Alejandra should choose strategy A or strategy B in order to implement Option 2 It should be recognized that given time constraints answers are likely to include a much narrower range of issues and concepts and it cannot be expected that all of the stimulus material is used There is no correct answer Strategy A This involves an in house marketing department Gavin Pratt will head up the new marketing department but he seems to have little experience He also appears not to have the confidence of other LadyA employees Item 1 He seems the right sort of go getter with something of a track record recognized externally Already effective links with the manufacturers in Malaysia and the distribution is outsourced to Minnesota What experience of international markets would they have The department is going to be slow implementing B2C e commerce but the data shows this is a huge and very rapidly growing channel of distribution Item 2 Asia Pacific shows massive growth unlike the other regions Item 2 Strategy A is low risk and limited in scope and is a safe option apart from the risk that Gavin may not have the staff on his side Strategy B Taking over a ready made organization with all the global functions necessary Fabco is strong in Asia the fastest growing market Items 2 and 3 It is a business in some difficulty so it might be a good target for a takeover With a small level of equity relative to debt Item 4 the share price might be low but taking it over LadyA would take on a large amount of debt Allows LadyA rapid entry into the online markets and a large retail chain in Asia Unethical behaviour by Fabco Item 3 How serious are the reports Are they just accusations These could damage LadyA s image The reported problems that European customers are having with online orders and accounts may be worrying but problems may be short lived Strategy B is ideal apart from the ethical issues and what to do with the debt Candidates are expected to have a clear and supported recommendation it could be either strategy as long as the answer is justified If the answer refers to Options 1 2 3 rather than strategies A and B only award comments relevant to Option 2 or strategies A and B marks limited to 2 If the candidate refers to only one strategy award a maximum of 7 An answer that refers neither to Gavin nor Item 4 award a maximum of 8 If the candidate does not make a recommendation but does include some judgments award a maximum of 9 Marks should be allocated according to the markbands on page 6 12

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2 N15 3 BUSMT SP1 ENG TZ0 XX Section A Answer two questions from this section 1 2 3 a Describe one way in which a problem with quality control line 115 could affect LadyA 2 b With reference to LadyA describe one reason for identifying target markets 2 c Explain one benefit to the local school and one benefit to Mrs Carroccio of providing training for Mrs Carroccio line 13 4 d Analyse the impact of technological change on Alejandra and her business 7 a Describe one method of primary market research and one method of secondary market research that could be useful to LadyA 4 b With reference to Mr Carroccio explain two reasons for setting up a business 4 c Analyse the importance of branding for Alejandra 7 a Describe two benefits to Mr Carroccio of owning his shoe repair business as a sole trader 4 b Using the additional information below calculate i ii c the average rate of return ARR for setting up Mr Carroccio s shoe repair business show all your working 2 the payback period for setting up Mr Carroccio s shoe repair business show all your working 2 Using your answers to part b and information contained in the case study analyse the issues that Mr Carroccio faced when he set up his shoe repair business Additional information Selected data for setting up Mr Carroccio s shoe repair business Set up cost 9000 Net returns per year for 5 years 3000 7

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3 N15 3 BUSMT SP1 ENG TZ0 XX M The markbands on pages 3 4 should be used where indicated in the markscheme Section A Q1 d Q2 c Q3 c Level descriptors Marks 0 7 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the case study 3 5 A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the case study not just to the name of the organization At the lower end of the markband responses are mainly theoretical 6 7 A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the case study

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4 N15 3 BUSMT SP1 ENG TZ0 XX M Section B Q4 d Level descriptors Marks 0 8 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the case study 3 4 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the case study not just to the name of the organization The response is mainly theoretical 5 6 7 8 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the case study are made at places in the response A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the case study are made throughout the response

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5 N15 3 BUSMT SP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section A 1 a Describe one way in which a problem with quality control line 115 could affect LadyA 2 Quality control is intended to ensure that products are being manufactured to an acceptable standard Poor quality problems with quality control can lead to dissatisfied customers loss of future sales poor quality perfumes etc could affect LadyA s reputation as well as the reputation of the perfumes negative impact on brand image Accept any other relevant problem Award 1 for a basic description that conveys knowledge and understanding Award 2 for a full clear description that conveys knowledge and understanding in relation to LadyA b With reference to LadyA describe one reason for identifying target markets The market segment that a particular product is aimed at is known as the target market LadyA s target markets were English speakers mostly teenage girls and young women from the United States US many Hispanics and some Spanishspeaking Americans For LadyA it is important to know her target market It provides the business a clear picture of the consumers and their profile in the target market It could include age gender income levels social class Knowledge of the target market helps the business make the right marketing mix decisions to provide the right product service meeting the taste and preference of the market it is aimed at the right price the consumer will be willing to pay at the right place using the most appropriate promotion strategy and offers that are likely to attract the specific market for whom the product service is designed Knowing the target market will lead to less wastage of resources in all the marketing mix Accept any other relevant reason with reference to LadyA Award 1 for a basic description that conveys knowledge and understanding Award 2 for a full clear description that conveys knowledge and understanding in relation to LadyA 2

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6 c N15 3 BUSMT SP1 ENG TZ0 XX M Explain one benefit to the local school and one benefit to Mrs Carroccio of providing training for Mrs Carroccio line 13 4 Aim of training is to improve the performance of employees It can lead to the following benefits Better performance by Mrs Carroccio as she is more confident from the new skills She may also be more motivated to do her job well as the school is investing in her The school could become reputed for being a good employer and hence it may become easier to attract people to apply for jobs It could improve the school s performance as Mrs Carroccio is performing better Accept any other relevant benefit N B Accept one benefit that is applied to both the school and Mrs Carroccio N B Do not accept an answer that refers to the charity where Mrs Carroccio learned English The question refers to the local school and Mrs Carroccio Mark as 2 2 Award 1 for the identification of a relevant benefit for the school Mrs Carroccio and 1 for an explanation of the benefit in relation to the school Mrs Carroccio Award a maximum of 2 d Analyse the impact of technological change on Alejandra and her business Some technological changes have had a positive impact and may be regarded as opportunities others a negative impact so they may be regarded as threats The availability of online file sharing software followed by emergence of MP3 players smartphones video hosting websites became popular Younger generation teenagers a major target market of LadyA relied heavily on these new technologies to get their music and videos Online file sharing of copyrighted material although often illegal was widely used This directly affected the sales of CD albums and profitability of music videos Production of online videos now had to be done by the artist themselves this was expensive and did not generate any direct revenue it denied artists and musicians their royalties LadyA had to find new ways to generate revenue She had to maintain herself as a media personality This involved strengthening her brand identity with an image that would fit the expectations of her target market LadyA used technology social media networks which her target market used to bond and communicate with them Accept any other relevant application analysis If the answer is not applied to LadyA award a maximum of 3 If the answer is limited to knowledge and understanding of case study material award a maximum of 4 If the answer lacks depth of analysis balance award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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7 2 a N15 3 BUSMT SP1 ENG TZ0 XX M Describe one method of primary market research and one method of secondary market research that could be useful to LadyA 4 Methods of primary market research could include surveys and questionnaires observation focus groups Methods of secondary market research could include media reviews market intelligence reports government publications on demographics and population census income levels business websites do not accept just internet or websites data about competitors Accept any other relevant method of primary secondary market research Mark as 2 2 N B Award a maximum of 3 overall if the answer is not applied to LadyA Award 1 for each correct and relevant primary secondary method of market research identified and 1 for an appropriate description of each of these Award up to a maximum of 2 b With reference to Mr Carroccio explain two reasons for setting up a business Reasons for Mr Carroccio setting up a business include economic insecurity encourages in people the need to be self reliant financial motivation security earning money desire for independence be his own boss possibilities of higher income in the long term as opposed to being employed make use of personal interests and skills put creative ideas into practice Accept any other relevant reason Mark as 2 2 N B Award a maximum of 3 overall if the answer is not applied to LadyA Award 1 for each relevant reason identified and 1 for its development Award up to a maximum of 2 per reason 4

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8 c N15 3 BUSMT SP1 ENG TZ0 XX M Analyse the importance of branding for Alejandra Branding is an essential part of marketing In this case the brand is LadyA First of all an appropriate brand name is important to match the expectations of the target market The brand will have its own related customer perception as customers associate the brand with certain qualities perception This was the reason Alejandra was very careful about what products she endorsed line 107 as she expected each of these to strengthen her brand identity as a beautiful mainstream American with Hispanic passion and intensity Branding is crucially important to Alejandra as it seeks to provide differentiation as well as a unique identity among other female music artists and film stars Under the LadyA brand Alejandra offered her own product line of perfumes and cosmetics targeted at teenage girls and young women sold in department stores in the US Given that Alejandra is successful in establishing the LadyA brand to the point that large numbers of consumers know the name and logo the company will have a much easier time when introducing new products Brands when effectively managed can have a longer product life cycle As long as value is associated with a brand Alejandra can add other products and lines such as LadyA handbags LadyA lingerie LadyA shoes Option 2 LAM will also enjoy the free advertising that comes with consumers using LadyA handbags or wearing shoes with its easily identifiable logo symbols Branding also enables loyalty which is important as most people tend to keep buying the same products once they identify with them Using her first brand name Lady Alejandra Alejandra hopes to attract patronage in the South American markets Option 1 which generally accept older female musicians and media stars The Spanish speaking markets will be addressed through methods such as a concert tour as well as through music downloads films product endorsements magazine covers etc There is also the option of Alejandra re branding herself to reposition her image associating herself with noble causes such as malnutrition homelessness human trafficking Option 3 There is a negative side to a strong brand identity If one of its products has problems the problem product can affect the entire brand It can be expensive to establish and maintain a brand Brands can go out of date This brand name needs to be consistent with the rest of the marketing mix for Alejandra and her products It may prevent development of individual product characteristics for example perfume versus handbags Accept any other relevant analysis N B Allow candidates to use the name Alejandra and LadyA interchangeably as long as they recognize that LadyA is the brand If the answer does not relate to LadyA Alejandra award a maximum of 3 If the answer is limited to only one aspect award a maximum of 4 If the answer lacks depth of analysis balance award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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9 3 a N15 3 BUSMT SP1 ENG TZ0 XX M Describe two benefits to Mr Carroccio of owning his shoe repair business as a sole trader 4 Benefits to Mr Carroccio include single ownership and control of the business not answerable to anyone all profits and losses belong to the single owner alone all decision making powers of the business technically vested with the single owner Accept any other relevant benefit Mark as 2 2 N B Award a maximum of 3 overall if the answer is not applied to Mr Carroccio or a shoe repair business Award 1 for each relevant benefit identified and 1 for its development Application could refer to Mr Carroccio s personal circumstances or that a sole trader is a typical set up of a shoe repair business Award up to a maximum of 2 per benefit b Using the additional information below calculate i the average rate of return ARR for setting up Mr Carroccio s shoe repair business show all your working ARR net return profit per annum capital outlay cost 100 2 3000 5 9000 5 100 13 3 9000 Award 1 for working and 1 for the correct answer ii the payback period for setting up Mr Carroccio s shoe repair business show all your working Payback It takes 3 years 36 months to earn 9000 at 3000 per year Award 1 for working and 1 for the correct answer 2

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10 c N15 3 BUSMT SP1 ENG TZ0 XX M Using your answers to part b and information contained in the case study analyse the issues that Mr Carroccio faced when he set up his shoe repair business ARR 13 3 allow OFR on this figure could be much better than any interest he could get on his savings Could it be even better if you extend the appraisal beyond 5 years What if the business was slow to start Payback He has not borrowed so is the payback important 3 years allow OFR on this figure seems a fairly long time Both measures present a favourable picture but how realistic is the data What other factors need to be considered It may have been his only opportunity to use his limited savings to make a secure life in the US How would he establish a market He is new to the US Other marketing issues what price what marketing can he do presumably limited What competition was there presumably established businesses New businesses find it difficult to get loans indeed he was turned down Difficult to start with limited finance Accept any other relevant analysis N B Allow candidate own figure rule OFR from their calculations to part b If the answer only uses case study material or only uses answers to part b ratios award a maximum of 3 If limited use of case study ratios award a maximum of 4 If the answer lacks depth of analysis balance award a maximum of 5 Marks should be allocated according to the markbands on page 3 7

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11 N15 3 BUSMT SP1 ENG TZ0 XX M Note to examiners do not penalize candidates for the use of LadyA or Alejandra interchangeably in their responses Section B 4 a Identify the four stages V W X and Y labelled on the product life cycle model below 4 V Introduction introducing launch W Growth X Maturity maturation not saturation Y Decline Award 1 for the correct identification of each stage up to a maximum of 4 b Explain why K J s Option 3 is a form of corporate social responsibility for LadyA K J s Option 3 proposes that LadyA use a part of her wealth to set up charitable non profit organizations for social causes the service of humanity such as malnutrition in developing countries or homelessness in big cities or international trafficking of children Associating herself with corporate social responsibility LadyA would rebrand herself from a young singer to taking an image of a strong mature determined compassionate woman appearing on television talk shows and magazine interviews promoting the cause of her non profit organizations A percentage from her shows and income sources could form a source of revenue for the non profit organizations Often businesses engage in corporate social responsibility with a strategic or an altruistic objective Award 1 2 for a basic answer showing knowledge of corporate social responsibility in general terms Award 3 4 for an answer which shows understanding of corporate social responsibility in the context of LadyA 4

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12 Apply the Ansoff matrix growth strategies to Options 1 and 2 New Existing Market penetration Product development New Product Existing Market development Diversification Market c N15 3 BUSMT SP1 ENG TZ0 XX M Option 1 Market development new South American markets for existing products Option 2 Option 2 could be described as Diversification new products new markets ie global market or Product development see reference to US market line 150 N B Candidates are not expected to mention both N B The terminology has to be exact for maximum marks ie do not credit terms such as market orientation or differentiation N B The diagram is not needed Award 1 for each option correctly associated with an element of the Ansoff matrix model up to a maximum of 2 Award an additional 1 for each relevant explanation in context up to maximum 2 Award up to a maximum of 4 in total 4

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13 d N15 3 BUSMT SP1 ENG TZ0 XX M Evaluate the effectiveness of Alejandra s different leadership styles Alejandra had very different leadership styles in her twenties to that in her thirties When Alejandra was in her twenties her leadership style was often inconsistent At times direct giving detailed instructions getting angry when they were not followed and at other times more laissez faire As she matured at the peak of her career her leadership style became more paternalistic Both are partly effective and partly ineffective Inferences must be drawn with support from the case study A laissez faire leader line 86 allows employees to carry out activities freely within broad limits It may result in a more relaxed atmosphere where there are few guidelines and directions It is characterized by poor communication it can often result in poor productivity mistakes For example Alejandra s laissez faire leadership style when she was in her twenties employees never knew what to expect communication was poor employees frequently complained behind her back mockingly called her la princesa Paternalistic style Alejandra developed this leadership style as she matured and was at the peak of her career She must have felt more responsible for the staff probably some many of them were employed with her for many years since the start of her career Alejandra would make all decisions however as a paternalistic leader it places a great deal of importance on the welfare of her staff Accept any other relevant evaluation point For full marks candidates must evaluate the effectiveness of both leadership styles in context with reference to the possible implications for Alejandra Where only one leadership style is evaluated the maximum mark that can be awarded is 4 Award a maximum of 3 for a general discussion of leadership Award a maximum of 4 for limited discussion in context Award a maximum of 5 for a discussion without evaluation judgment Marks should be allocated according to the markbands on page 4 8

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2 N15 3 BUSMT HP2 ENG TZ0 XX Section A Answer one question from this section 1 EcoCycle Dan Perdue is a sole trader who sells bicycles His unique selling point USP is bicycles that are made from recycled materials using environmentally friendly processes Dan s customers are willing to pay high prices for these types of bicycles and they have a price inelastic demand Currently Dan purchases the bicycles from GreenRide a local manufacturer GreenRide bicycles are well made rarely have defects and are well known to environmentally conscious cyclists The income elasticity of demand for Dan s bicycles is greater than one Table 1 financial data for Dan s bicycles for 2015 Number of bicycles sold 130 Sales price per bicycle 1000 Variable costs per bicycle 650 Fixed costs per year 42 000 The economy is forecasted to grow in the upcoming years To take advantage of the growth potential Dan is considering forming a partnership with David Brown a skilled mechanic who knows how to manufacture bicycles Both Dan and David would be equal partners and split the profits The partnership will begin on 1 January 2016 and would trade under a newly created brand EcoCycle Recycled materials and environmentally friendly processes would be used to manufacture all the EcoCycle bicycles Table 2 forecasted financial data for EcoCycle bicycles for 2016 Number of EcoCycle bicycles sold 200 Variable costs per EcoCycle bicycle 300 Fixed costs per year 65 000 Dan however conducted primary market research which indicated that respondents were only willing to pay a much lower price for the untested unknown brand EcoCycle This question continues on the following page

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3 N15 3 BUSMT HP2 ENG TZ0 XX Question 1 continued a b c d Describe one advantage and one disadvantage for Dan of using primary market research 4 Using Table 1 calculate for Dan for 2015 i the break even number of bicycles show all your working 2 ii the total profit show all your working 2 Explain one benefit for Dan of the income elasticity of demand for his bicycles being greater than one 2 Using Table 2 for the new EcoCycle bicycles for 2016 i ii calculate the price that Dan must charge to earn a target profit of 20 000 with sales of 200 EcoCycle bicycles show all your working 2 using your answer to part i and assuming that Dan reduces this price by 5 calculate the number of bicycles EcoCycle must sell to still have a target profit of 20 000 3 e Explain two reasons why branding of the new EcoCycle bicycles will be important 4 f Examine Dan s decision to create a partnership with David to manufacture and sell EcoCycle bicycles 6 Turn over

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4 2 N15 3 BUSMT HP2 ENG TZ0 XX Bip Bip BB Nicol s and Loura want to start up a vehicle rental business in Punta del Este a seaside resort in the Southern Hemisphere The business will operate as a partnership and be called Bip Bip BB Tourist numbers are very high during the summer December to February months in the Southern Hemisphere the beach and water sports attract many tourists BB will rent out convertible cars electric cars and minivans BB will purchase these vehicles through a leasing scheme Because most rental income will occur in a few months of the year we must forecast our cash position during the slow months and we must follow a budget says Loura She has forecasted the following figures for the first six months of operation beginning in December 2015 All revenues received and costs paid will be in cash All cash sales are paid at the time of the vehicle rental Monthly revenue from rentals December 2015 to February 2016 Monthly revenue from rentals March to May 2016 Monthly overheads starting in December 2015 Leasing fee for all vehicles payable by BB every other month starting in December 2015 Monthly variable costs December 2015 to February 2016 Monthly variable costs March to May 2016 Opening balance in December 2015 11 000 1000 2000 5000 1500 300 1000 Due to the increasing importance of e commerce BB would like to offer an online booking service in addition to their website Nicol s believes that an online booking service will allow BB to reach a wider national and international market and will also reduce marketing costs However Loura argued that e commerce also has some limitations After further discussion Nicol s and Loura decided not to set up an online booking service However after May 2016 they will examine the budget and variances with care to determine if BB should offer an online booking service the following year This question continues on the following page

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5 N15 3 BUSMT HP2 ENG TZ0 XX Question 2 continued a Describe one reason why customers might be reluctant to use an online booking service e commerce 2 b Identify two features of a partnership 2 c i Prepare a monthly cash flow forecast for BB for the first six months of operation 6 ii Explain BB s forecasted cash flow position 3 iii Calculate the forecasted net profit without any depreciation for the first six months of operation show all your working 2 d In June 2016 BB discovered that some of their forecasts had been inaccurate For December 2015 and January and February 2016 variable costs had been 10 lower than forecasted i ii Calculate the impact of lower variable costs on BB s closing cash balance at the end of February 2016 show all your working For March April and May 2016 revenue was 10 higher Calculate the impact of lower variable costs and higher revenue on BB s closing cash balance at the end of May 2016 show all your working e 2 Analyse the role of budgets and variances in strategic planning for businesses such as BB 2 6 Turn over

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6 N15 3 BUSMT HP2 ENG TZ0 XX Section B Answer two questions from this section 3 Transfer Transfer is a publicly traded shipping business Its success has been built on its ambitious mission statement Our shipping business will always be about providing a first class service to our customers and making it last Whatever it takes Managers at individual regional profit centres were empowered to make their own decisions in response to local market conditions Transfer s financial reward package allowed employees to share in their regional profit centre s performance through an employee share ownership scheme Transfer had consistently won awards for its excellent customer service Management and staff turnover was very low However after years of profits that were low by industry standards Transfer suffered a significant financial loss The current chief executive officer CEO claimed it was due to increased global competition and rising direct costs Transfer s non employee shareholders who owned 60 of Transfer demanded that immediate action be taken At the most recent annual general meeting AGM the CEO was forced to resign A new CEO Heather Davies was appointed Heather had a reputation as an autocratic leader She had a successful record of returning loss making companies to high profits but only after making significant changes At her first press conference Heather announced her plan to reduce two way communication and create a much higher degree of centralization within Transfer remove all profit centres Immediately Heather dismissed many managers who were in her opinion unproductive She defended her actions by arguing that Transfer had become inefficient with poor decision making at regional levels Heather argued that regional profit centre managers were setting their own objectives which did not follow the mission statement At the same time an unknown manager gave a national newspaper interview which was highly critical of Heather s leadership style with examples of workplace unrest When Heather found out she threatened to dismiss any manager who questioned her authority or the new plan Six months later Transfer s share price had grown by 15 and profits had begun to significantly increase This question continues on the following page

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8 4 N15 3 BUSMT HP2 ENG TZ0 XX Mergers in the airline industry Recently British Airways merged with Iberia and Air France merged with KLM Both mergers resulted in some significant benefits Ryanair plans a 560 million takeover of the Irish airline Aer Lingus which has failed to deliver shareholder dividends One shareholder the Irish government owns 25 of the shares of Aer Lingus Ryanair s chief executive officer CEO said that the proposed takeover could create revenue and a positive return for the Irish government by selling its shares create a strong Irish airline capable of competing with major European airlines This form of external growth is also occurring in the United States US American Airlines and US Airways will merge forming the nation s biggest airline to be called American Airline analysts argue that mergers are necessary to reduce financial uncertainty and restore stability to a business that lost about 60 billion in 10 years Large airlines with big networks can invest in new airplanes new routes and better facilities and provide passengers with more travel options Mergers are likely to increase operational and financial efficiencies and create economies of scale Airline analysts favouring airline mergers emphasize that each merger must be approved by appropriate national and international regulatory agencies to ensure that the competitive nature of the industry is maintained Other analysts however argue that large airlines make it difficult for smaller rivals to compete and in the long run reduce competition This situation may lead to higher fares and a poorer service being larger may not make airlines globally competitive Some national governments restrict operation of foreign airlines within their countries which allows a local airline monopoly to exist strategic decisions are difficult to implement as companies grow in size larger is not always better Source adapted from http dealbook nytimes com http www guardian co uk http www nytimes com monopoly an industry where there may be only one seller producer of a particular good or service This question continues on the following page

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10 5 N15 3 BUSMT HP2 ENG TZ0 XX Sigma Productions SP Sigma Productions SP a market leader with a strong family brand name develops and sells online computer games The social technological and competitive environment is changing rapidly Product life cycles for online games are becoming much shorter SP must keep innovating but this process is costly and time consuming It can take at least three years to develop and introduce a new computer game to the market One online game Sigma Starfighter 1 was a major financial success Now SP is developing a new version Sigma Starfighter 2 which will be released in 2016 Its release is causing great excitement Sigma Starfighter 2 will be priced using penetration pricing SP s main source of finance has been retained profits SP is developing an application app for mobile phones The app will allow users to access information about the company and try new online games through limited free trials The app will also add value to the family brand The app is expected to be launched before Sigma Starfighter 2 is released and will be given away for free However SP s current cash flow position is weak With high research and development R D costs SP needs additional capital to complete the development of the app and Sigma Starfighter 2 Four different banks have refused to provide finance SP must urgently attract new investors a Describe one reason for the importance of innovation for SP 2 b Identify the first two stages of the product life cycle 2 c Explain one benefit and one cost of family branding for SP 6 d Analyse the appropriateness of penetration pricing for SP when they launch Sigma Starfighter 2 6 Discuss two problems of financing research and development R D for a business such as SP 9 e

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3 N15 3 BUSMT HP2 ENG TZ0 XX M The markbands on pages 3 4 should be used where indicated in the markscheme Section A Q1 f Q2 e Section B Q3 d Q4 d Q5 d Level descriptors Marks 0 6 0 1 2 3 4 5 6 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the stimulus material The response is mainly theoretical A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the stimulus material not just to the name of the organization A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the stimulus material

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4 N15 3 BUSMT HP2 ENG TZ0 XX M Section B Q3 e Q4 e Q5 e Level descriptors Marks 0 9 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the stimulus material 3 4 A description with some knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the stimulus material not just to the name of the organization The response is mainly theoretical 5 7 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the stimulus material are made at places in the response 8 9 A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the stimulus material are made throughout the response

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5 N15 3 BUSMT HP2 ENG TZ0 XX M Section A 1 a Describe one advantage and one disadvantage for Dan of using primary market research 4 Possible advantages for Dan of using primary market research include Dan can collect first hand responses based on tailor made questions by distributing questionnaires or interviewing some of his customers in order to discover their opinion on the various marketing mix especially the possible pricing strategies Dan found valuable information that the customers were not willing to pay as high a price as before Moreover given the small size of the organization the customers chosen are likely to be a representative sample The information collected is only available for Dan EcoCycle Competitors have no access Accept any other relevant advantage Possible disadvantages for Dan of using primary market research include Using targeting his current customers as a sample he might overlook potential different viable segments that might be interested in the different bicycles he might be selling Primary market research is likely to be more expensive and time consuming for Dan as a sole trader than the use of secondary market research Dan might not have the knowledge and the experience to design a good unbiased questionnaire or interview Accept any other relevant disadvantage Mark as 2 2 Award 1 for identifying each appropriate advantage disadvantage and 1 for an appropriate and applicable description up to a maximum of 2 b Using Table 1 calculate for Dan for 2015 i the break even number of bicycles show all your working Break even point Fixed cost Contribution 42 000 1000 650 350 120 bicycles N B Candidates may use a different method Award 1 for a correct answer and 1 for correct working Award up to a maximum of 2 2

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ii 6 N15 3 BUSMT HP2 ENG TZ0 XX M the total profit show all your working 2 Profit Total revenue Total cost 130 1000 42 000 650 130 130 000 126 500 3500 N B Candidates may use a different method eg contribution per unit x margin of safety Award 1 for a correct answer and 1 for correct working Award up to a maximum of 2 Award full marks even if the sign is not presented c Explain one benefit for Dan of the income elasticity of demand for his bicycles being greater than one If the income elasticity of demand for his bicycles is greater than one it means for Dan s business that for every 1 change in customers income their response in terms of spending on purchasing the bicycles is going to be larger than 1 Practically given that the economy is forecasted to grow and therefore people will experience an increase in their income for every 1 increase in income there is going to be a more significant higher spending on Dan s bicycles Dan is likely to benefit significantly through increased revenue and if costs remain the same then also through increased profits Award 1 for a relevant and correct benefit for Dan of the consumer demand for bicycles being income elastic identified and 1 for an explanation of this benefit up to a maximum of 2 Accept application of names the correct explanation should show understanding of the concept N B If the explanation is generic and not applied to Dan the product bicycles EcoCycles award 1 2

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7 d N15 3 BUSMT HP2 ENG TZ0 XX M Using Table 2 for the new EcoCycle bicycles for 2016 i Calculate the price that Dan must charge to earn a target profit of 20 000 with sales of 200 EcoCycle bicycles show all your working Price needed to reach a target rate of profit 20 000 65 000 200 units 300 2 target profit total cost 200 units 200 units 725 per EcoCycle bicycle Award 1 for a correct answer and 1 for correct working Award up to a maximum of 2 ii using your answer to part i and assuming that Dan reduces this price by 5 calculate the number of bicycles EcoCycle must sell to still have a target profit of 20 000 3 A 5 reduction of the price of 725 is 36 25 The new price is therefore 725 36 25 688 75 The number of bicycles that must be sold to achieve the same level of profit Total revenue Total cost 20 000 688 75X 65 000 300X 20 000 688 75X 65 000 300X 20 000 388 75X 85 000 X 218 65 to 2d p 219 EcoCycle bicycles need to be sold to reach a target profit of 20 000 N B Do not accept 218 bicycles as EC will not reach the target profit Award credit for a logical clear method that results in a correct answer even if there are no headings If the candidate rounded up the new price but the working is correct award a maximum of 2 Accept any other method Allow candidate own figure rule OFR Award 1 for the correct calculation of the reduced price Award 1 for the correct number of bicycles and 1 for correct working If no workings are shown but the final answers are correct award a maximum of 2

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8 e N15 3 BUSMT HP2 ENG TZ0 XX M Explain two reasons why branding of the new EcoCycle bicycles will be important Moving away from GreenRide and not really having much of a new USP Dan needs to brand EcoCycle The market research clearly indicates that currently the customers perception of the brand is somewhat different to what Dan expected Branding has a vital role in creating awareness of the EcoCycle bicycles as well as the right positioning and perceptions supported by a USP some sort of differentiation Successful branding could lead to more customer loyalty Hence the availability of substitutes like GreenRide is reduced in their minds EcoCycle bicycle s demand will increase market share should also increase and more revenue profit is likely to be generated Strong branding will create barriers to entry for other bicycle producers Some potential competitors may be reluctant to enter the market EcoCycle s market power may increase increase in demand If Dan and David are able to create a strong brand image with the desired positioning the more price inelastic they will be to EcoCycle hence less responsive to possible increases in the price of the bicycles and be able to tolerate a high premium price The market research clearly indicates that currently the customers perception of the brand is somewhat different to what Dan perhaps expected and customers expect a reduction in the price of the EcoCycle bicycles due to its untested nature Correct and successful branding should address this issue hence more flexibility in setting a high price possibly in the future to cover the costs and increase profit It is not expected that candidates will refer to price elasticity in their answers but they do have to show understanding of the current reluctance of the customers to pay a high price N B Reward candidates that cover other relevant but different issues not just an extension of the above points issues Award 1 2 for a response that lacks some depth For 1 the response may only refer to one reason why branding is important to the new EcoCycle bicycles For 2 one reason is given in depth only and may refer to either only loyalty or market power and or pricing implications Award 3 4 for a response that clearly explains the importance of branding for the new EcoCycle bicycles For 4 two reasons are explained and may refer to building loyalty and the ability of Dan to charge in the future higher than currently expected prices or increased market power For 3 the explanation includes two aspects but it is unequal 4

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9 f N15 3 BUSMT HP2 ENG TZ0 XX M Examine Dan s decision to create a partnership with David to manufacture and sell EcoCycle bicycles Currently as a sole trader Dan makes a very small amount of profit 3500 This amount is probably not sustainable hence a solution has to be found Through a partnership with David perhaps Dan can specialize in marketing while David s specialization clearly lies in the operation function of the business Both have complementary skills One of the advantages of forming a partnership is specialization of the partners and sharing the burden and responsibilities of running the organization Decision making in this new business will be improved due to shared skills experience The increased capacity of the new business will enable Dan EcoCycle to create a strategic fit between internal strengths like good manufacturing of the bicycles and the growth opportunities in the external environment It implies that David will bring a considerable amount of assets and funds to increase the capacity from 130 to 200 bicycles The increased capacity and different costs due to the partnership will indeed enable Dan to charge a lower price of 725 or less which is around 25 reduction in price which Dan discovered that he must do given the results of the market research A price reduction will make the business more customer focused Profit will have to be shared but given quantitative results the profit for Dan will increase considerably in 2016 after the partnership has been establish Even after dividing the 20 000 between the two partners Dan will have 10 000 profit much more than 3500 The procedures of forming a partnership are minimal short and not very expensive The partnership does not have to be approved by any legal body Financial documents of the business will not have to be published However if the price is reduced due to the lower product positioning and current customers brand perception the business will not have the capacity to manufacture and sell the 219 bicycles required to achieve the target profit of 20 000 Forming a partnership with David will not enable Dan to have limited liability The risk of losing his personal assets which will be larger than before still exists Some disagreement between David and Dan might occur and the partnership may have to be dissolved if they cannot reach an agreement It will take some time to see how well Dan and David can operate together before we can make a judgment over whether the partnership will be a success Accept any other relevant and applicable argument for or against Allow candidate own figure rule OFR It is expected that the candidate goes beyond just a theoretical coverage of the advantages and disadvantages of forming a partnership and incorporate apply perhaps some relevant financial information and other information issues from the stimulus material such as the issue of increased capacity and so on 6

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10 N15 3 BUSMT HP2 ENG TZ0 XX M Candidates might not use specific figures but relevant application to the issue of forming a partnership for manufacturing the EcoCycle bicycles is expected Application should go beyond just mentioning the names It is not expected that the candidates covers all of the above issues 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 For one relevant argument for and one relevant argument against award up to 4 For 5 it is expected that the examination is relevant and detailed but it may lack some balance For example it includes only two detailed arguments for and one detailed argument against For 6 it is expected that the examination will contain at least two detailed arguments for and at least two detailed arguments against Dan s decision to create a partnership with David to manufacture and sell EcoCycle bicycles Marks should be allocated according to the markbands on page 3

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11 2 a N15 3 BUSMT HP2 ENG TZ0 XX M Describe one reason why customers might be reluctant to use an online booking service e commerce 2 Possible reasons why customers might be reluctant to use an online booking service e commerce include Security reasons sometimes e commerce is hacked and thieves steal credit card numbers or money Impersonal service many customers find online booking services impersonal or intimidating because they are not interacting with a human being Lack of access though this is less of a problem today not everyone has easy access to computers or the internet or has a computer and internet access that can handle the most up to date software or applications thus making e commerce difficult Accept any other relevant reason Award 1 for a correct identification of a reason and 1 for a relevant description Award up to a maximum of 2 Application is not expected b Identify two features of a partnership Possible features include it s an association between 2 to 20 partners partners do not have limited liability it is an unincorporated business Accept any other relevant feature Award 1 for each appropriate feature identified up to a maximum of 2 2

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12 c i N15 3 BUSMT HP2 ENG TZ0 XX M Prepare a monthly cash flow forecast for BB for the first six months of operation 6 All figures are in Sales revenue Total receipts Overheads Leasing fee Variable costs Total payments Net cash flow Opening balance Closing cash balance December 2015 11 000 January 2016 11 000 February 2016 11 000 March 2016 1000 April 2016 May 2016 1000 1000 11 000 2000 5000 11 000 2000 11 000 2000 5000 1000 2000 1000 2000 5000 1000 2000 1500 1500 1500 300 300 300 8500 2500 3500 7500 8500 2500 2300 1300 7300 6300 2300 1300 1000 3500 11 000 13 500 12 200 5900 3500 11000 13500 12200 5900 4600 Accept slightly different headings format N B Allow candidate own figure rule OFR if a candidate makes an error in one row and carries it through the remainder of the forecast that is only one error This provision includes both mathematical errors and conceptual errors for example if a candidate has the leasing fee monthly rather than every other month it is one error and candidates should only lose 1 for that error Award 1 if the candidate conveys some understanding of what a cashflow forecast is but otherwise the forecast is largely inaccurate incomplete or illegible Award 2 3 if a cash flow forecast is drawn but either it is not in a generally accepted format or it is untidy and the forecast contains two or more errors which could include in addition to number placement problems and mathematical errors conceptual errors using the word profit rather than net cash flow or omissions such as not having a line like closing balance Award 4 5 if the cash flow forecast is drawn essentially correctly and neatly in a generally accepted format but there is one error for 5 or two errors for 4 Award 6 if the cash flow forecast is drawn accurately and neatly in a generally accepted format and is error free Substituting the term net profit in the cash flow forecast for net cash flow is inaccurate If the candidate has only one row for all cash outflows subtract 1 from the total mark awarded

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13 ii N15 3 BUSMT HP2 ENG TZ0 XX M Explain BB s forecasted cash flow position Although the cash balance is positive at the end of six months the monthly net cash flows are only positive in the first 3 months If the figures for remaining low season months June through November continue BB s cash balance would be negative by the end of month 7 June and by the opening of high season next summer the cash balance would be 18 200 far greater than the cumulative positive balances for the 3 peak months The cash flow forecast shows that the current business model is not sustainable Allow candidate own figure rule OFR Award 1 for an accurate basic description Award an additional 1 for an explanation that incorporates some reference to specific figures which could be actual numbers or references to a specific row in specific time periods net cash flows in December January and February is a specific reference to actual numbers even if numbers are not present in the text whereas In the seasons that they do not rent as much the cash inflows do not sustain their cash outflows is not a specific reference to specific numbers Award 1 if the candidate recognizes that the business will have a deficit or cash flow problems in the months to come N B A candidate could produce a response that earns 1 for a basic description and 1 for recognizing a deficit in months to come for a total of 2 even though the candidate did not have specific reference to numbers 3

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14 iii N15 3 BUSMT HP2 ENG TZ0 XX M Calculate the forecasted net profit without any depreciation for the first six months of operation show all your working Method 1 Profit sales revenue total costs Sales revenue 11000 3 1000 3 36 000 Total costs overheads variable costs leasing fee Total costs 2000 6 1500 3 300 3 5000 3 12000 4500 900 15 000 32 400 Forecasted net profit 36 000 32 400 3600 Method 2 allow OFR Closing balance in May opening balance in December 4600 1000 3600 Award 1 for correct working and 1 for the correct answer Award up to a maximum of 2 A candidate may calculate monthly profit for all six months such as All figures in Revenue Expenses Net profit December January February March April May 11 000 11 000 11 000 1000 1000 1000 8500 3500 8500 2300 7300 2300 2500 7500 2500 1300 6300 1300 This approach is acceptable even if a total for all six months is not produced Award 1 for working and 1 for the correct answer all six months correct though OFR does apply Award up to a maximum of 2 2

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16 ii N15 3 BUSMT HP2 ENG TZ0 XX M For March April and May 2016 revenue was 10 higher Calculate the impact of lower variable costs and higher revenue on BB s closing cash balance at the end of May 2016 show all your working Method 1 10 100 increase in total revenue per month x 3 300 in total The closing balance in May 2016 has an improvement of 5350 4600 450 lower VC Dec to Feb 300 higher revenue Mar to May 5350 closing balance for May Method 2 Calculating the new variable costs based on 10 reduction 100 the first calculation Multiply by 3 to arrive to the total reduction of 300 second calculation Add to the closing balance at the end of May third calculation Transfer the 450 reduction to the closing balance at the end of May or use closing balance of 13 950 at the end of February Add the figures together the saving together of 750 to arrive at the final closing figure of 5350 at the end of May 4600 750 5350 Accept any other correct working Allow candidate own figure rule OFR Award 1 for correct working and 1 for a correct answer Award up to a maximum of 2 2

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17 e N15 3 BUSMT HP2 ENG TZ0 XX M Analyse the role of budgets and variances in strategic planning for businesses such as BB Budgets are an important planning tool for businesses as they are based upon forecasted revenues and costs thus providing a business such as BB a framework as part of its strategic planning It translates objectives and strategies financial discipline A budget is essentially a tool for resource allocation as part of a strategic planning Budgets provides financial direction discipline for a business BB Managers such as Nicol s and Loura know to limit expenditures to remain within their allocated resources and to ensure that the forecasted revenue are also met However the process of budgeting is time consuming especially for Nicol s and Loura as both are inexperienced Still given the small size of the business one may argue that the process can be quick and relatively efficient Budgets especially if negotiated rather than imposed can create a sense of clarity direction unity and if adhered to achieved sense of achievement to BB s employees However budgets are a form of forecast Actual revenue or expenditure can differ due to internal and external circumstances For this reason analysing variances or instances when revenue or expenditures differed from the budget can be helpful If a business can understand why particular expenses or revenues were higher or lower than budgets in subsequent periods budgets can be adjusted depending on the reasons why a variance occurred allowing for better decision making about allocation of resources Budgets can create resentment and demotivation among BB employees especially if unrealistic high targets for revenue and low targets for expenditure are set There may also be some disagreement between Nicol s and Loura especially as they lack experience Unhealthy competition may occur Moreover analysing variances can also take up time and resources The partners of BB who are essentially the decision makers can be biased in their interpretation of the variances They may have to employ an accountant or outside person to give them a more objective view of the performance of the business Accept any other relevant analysis It is not expected that the candidates covers all of the above issues Do not credit an answer that refers to different sources of finance to deal with the forecasted budgeted cash flow problems It is expected that candidates refer to the issue of strategic planning budgets and not just cash flow 6

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18 N15 3 BUSMT HP2 ENG TZ0 XX M Since there are two issues concepts to analyse one argument for and one argument against each budgets and variances should be judged as a balance response Accept generic application as there is not much specified in the stimulus A balance response of one concept issue award up to 4 For 5 it is expected that the analysis is relevant and detailed but it may lack some balance For example it includes only two detailed arguments for and one detailed argument against For 6 it is expected that the analysis will contain at least two detailed arguments for and at least two detailed arguments against budgets and variances in strategic planning for businesses such as BB Marks should be allocated according to the markbands on page 3

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19 N15 3 BUSMT HP2 ENG TZ0 XX M Section B 3 a Identify two characteristics of a company with a high degree of centralization 2 Characteristics include decision making being made by a small number of directors managers owners limited if any two way communication between levels of hierarchy Accept any other relevant characteristic Award 1 for each characteristic correctly identified Up to a maximum of 2 b Describe one benefit of an employee share ownership scheme Possible benefits to employees of an employee share ownership scheme include financial gain in the form of dividends or capital gain as shareholders they will have the right to vote at the AGM and approve or otherwise the strategic decision of the board of directors Possible benefits to Transfer of an employee share ownership scheme include increased motivation of staff and hence productivity improvements a reduction in waste and an acceptance of the mission statement staff turnover will be lower if motivated leading to reduced induction training and recruitment costs N B The benefit of an employee share ownership scheme could be in the context of the employee and or the employer Award 1 for a relevant benefit identified and 1 for a description of this benefit Up to a maximum of 2 2

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20 c N15 3 BUSMT HP2 ENG TZ0 XX M Explain one benefit and one cost of Transfer s mission statement A mission statement is designed to guide the current objectives and operations of Transfer Managers customers will be attracted to Transfer for its excellent customer service and commitment to satisfying needs whatever the cost This could be a possible USP within the shipping industry in an era of increased global competition Maintaining their quality benchmark of a first class business in a first class way through the mission statement can provide a sense of direction and can be motivating for the workers There is evidence in the stimulus that the workers are motivated and the staff turnover is very low However the mission statement can be a problem for Transfer given that the firm has experienced a significant financial loss First class service may have an expensive cost aspect as the stimulus reveals Whatever it takes implies further that Transfer will carry out its service regardless of the impact on profitability and this may be unwise The mission statement may be seen as unrealistic and too ambitious for different stakeholders to believe in it The mission statement represents a noble if costly exercise which it would appear that Transfer does not have the financial resources to honour Accept any other relevant issue N B Candidates may refer to some benefits to different stakeholders N B Application could relate not just to repeating the statement but to the consequences Mark as 3 3 Award 1 for identification of the relevant benefit cost 1 for a clear explanation and 1 for full application to Transfer and not just the name of the business Award a maximum of 3 6

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21 d N15 3 BUSMT HP2 ENG TZ0 XX M Examine the decision to remove all profit centres Possible arguments against Transfer s success has been built on regional profit centres with empowerment for local managers By removing profit centres the accountability of each centre in different regions will be removed Staff will be less motivated as decision making power that goes with profit centres will disappear Constructive competition between the regions may also be eroded Overall Transfer s quality may be reduced as the link to profit sharing has gone and the mission statement and the consequent objectives may not be fulfilled It might be harder for Heather to monitor performance of individual parts of Transfer Removing profit centres is risky given that employees own 40 of the organization The link to profit sharing has gone which could be demotivating However there is evidence from the stimulus that profit centres are not providing the competitive edge that Transfer s mission statement would suggest Costs are rising and increasing global competition will drive down revenues Moreover the managers did not follow the mission statement and set their own objectives Hence centralization will align all regions with Transfer s objectives Consistency will be created Transfer could avoid duplication of resources by removing the profit centres and perhaps reach purchasing promotion managerial economies of scale which is very essential now that a loss is being made Cost cutting is a must The move to centralization will increase efficiency and improve communication Moreover monitoring and compiling profit centre data can be time consuming and expensive for Transfer The move to remove all profit centres and increase centralization would fit more closely with Heather s leadership style and may have pleased the other shareholders Accept any other relevant examination N B It is not expected that candidates incorporate all of the above points issues Do not highly credit candidates that show no evidence of understanding of the meaning the nature of profit centres but refer to a decision to remove regional production The assumption based on the stimulus is that the regional centres remain 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 For one relevant argument for and one relevant argument against award up to 4 For 5 it is expected that the examination is relevant and detailed but it may lack some balance For example it includes only two detailed arguments for and one detailed argument against For 6 candidates must give a balanced examination of two possible arguments for and two possible arguments against the decision to remove all profit centres Marks should be allocated according to the markbands on page 3 6

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22 e N15 3 BUSMT HP2 ENG TZ0 XX M Discuss the effectiveness of Heather s leadership style at Transfer From a financial point of view given the increase in profits and share price Heather s leadership style could be considered to be a success Non employee shareholders who voted for the changes at the AGM will clearly be very pleased The stimulus indicates that the previous organizational structure was too bureaucratic with empowerment and a resistance to change despite the poor industry performance leading to the dramatic financial loss The empowerment factor may have led to some managers underestimating the extent of Transfer s financial difficulties and to set new objectives without considering the financial implications Too much emphasis was put on customer service but with a decrease in productivity The turnaround in Transfer s performance occurred within six months This is a very rapid and significant improvement given the performance of previous years However one may argue that the short term success is indeed impressive but may not last in the medium and long term when employees and managers will fear her and resent the new culture of Transfer Low level of motivation potential high staff turnover may create a real problem for Transfer An autocratic leader who will do whatever it takes to return Transfer to profitability may severely affect motivation Recruitment of new employees may be difficult when Transfer expand and need more staff Customers may also choose competitors due to rumours of the threats to the employees and Heather s leadership style Negative publicity from a newspaper article is already evident Heather s leadership style may conflict with the mission statement of the company although this may be what she intends to happen and may lead to industrial action and further unrest but more importantly to the loss of its USP However the stimulus refers to Heather s past in turning other companies around This might suggest that her tenure is only likely to be short term anyway perhaps to be followed by a more paternalistic leadership style Possible judgment The stimulus indicates that Transfer needed to change after a number of years of less than satisfactory performance Centralization and a reduction in communication may speed up decision making at Transfer and there seems to be a need for increased productivity Heather s changes has quickened the recovery and was financially successful However effectiveness cannot be judged on quantitative issues only Given the change it could lead to long term qualitative problems perhaps the change has been too dramatic and perhaps a paternalistic leadership style should have been adopted or perhaps not all of her suggestions should have been implemented at once but introduced more incrementally Heather s changes may have been successful financially in the short run but we must question whether they will continue to be so over the longer term Accept any substantiated discussion N B It is not expected that the candidates incorporate all of the above points issues 9

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24 4 a N15 3 BUSMT HP2 ENG TZ0 XX M Describe one difference between a merger and a takeover 2 The difference between a merger and a takeover is that a merger is largely done in a friendly or voluntary manner The managements and the shareholders of both companies agree to bring both firms together under a common board of directors and create one new legal entity In contrast a takeover is commonly hostile or involuntary For one company to takeover take control of another company the majority of shares has to be bought by the bidder usually 51 It can be less N B The difference does not have to be based on being hostile or not as a takeover can also be friendly The candidates need to show understanding of the need to buy shares to gain control for a takeover for full marks Candidates are not expected to word their description exactly as above Award 1 for a basic description that conveys partial knowledge and understanding of either a merger or a takeover Award 2 for a full clear description that conveys knowledge and understanding similar to the answer above b Define the term economies of scale Economies of scale are the factors that cause a reduction in average costs cost per unit as the organization increases the scale of production Award 1 if the candidate refers just to the growth of an organization rather than to the scale of production 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 similar to the answer above For only a relevant example or application to the stimulus award 1 2

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25 c N15 3 BUSMT HP2 ENG TZ0 XX M With reference to the airline industry explain two differences between external growth and internal growth 6 Internal growth within the airline industry occurs when the airline itself grows organically by using its own resources to increase its scale of operation increasing revenue and market share Typically through investment in more aircrafts new routes destinations or as stated in the stimulus more travel options by targeting new passenger segments different classes heavy promotion changes and its pricing strategies to name some examples Internal growth will allow each individual airline to maintain full ownership control of the process in terms of expenditure and speed Internal growth is often a cheaper strategic option than external External growth within the airline industry occurs with interaction involvement of other airline s typically through mergers acquisition joint ventures or a strategic alliance The stimulus provides examples of friendly mergers between American airlines as well as between two European airlines on top of the current proposed takeover hostile of Aer Lingus by Ryanair External growth will give an airline a faster growth option while reducing competition in the market American is now the biggest carrier in the US External growth is an expensive option The proposed takeover of Aer Lingus will cost Ryanair 560 million Accept any other relevant and applicable difference Mark as 3 3 Award 1 for identifying each appropriate difference between the two methods of growth 1 for an appropriate explanation and 1 for a further development of this explanation with reference to the airline industry Award a maximum of 3 Award a maximum of 2 for each difference explained if no relevant reference is made to the stimulus material airline industry d Examine the Irish government s decision to own 25 of the shares of Aer Lingus One possible reason for the Irish government s decision to own 25 of shares in Aer Lingus is to raise revenue in the form of dividends from the profit of a commercial airline Owning 25 of a commercial airline that can generate profit can give the Irish government a substantial sum of money The Irish government needs revenue to peruse its economic objectives Dividends shared among all shareholders is one source of revenue In short a profit commercial motive However it is implied in the stimulus that such an expected profit motive commercial interest was perhaps not a good decision as profit dividends has not been materialized as yet for the Irish government Only by selling its shares will the Irish government get its first commercial return 6

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26 N15 3 BUSMT HP2 ENG TZ0 XX M Another possible reason positive benefit is to make a capital gain by selling its shares when the government sees fit It is stated in the stimulus that the Irish government will make a positive return by selling its shares in Aer Lingus Hence a commercial success However some citizens and competitors may argue that the decision to buy shares in an airline and waiting for some positive return for such a long time is a waste of tax payers money The money could have been spent on perhaps more worthwhile provisions by the government Furthermore some critics may argue that this decision reduced the incentive for Aer Lingus to be a commercial success Still national pride of being part owner of a national airline can be seen as another possible reason The Irish government might have a strong national interest of enabling an Irish airline to compete with other airlines by providing the funds for investment There may be significant longer term benefits and future dividends and returns from having an interest in an airline which is able to generate longer term growth through being more competitive Candidates may mention security political reasons and any other relevant reason Accept any relevant arguments for and against N B It is not expected that the candidates incorporate all of the above points issues 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 For one relevant argument for and one relevant argument against award up to 4 For 5 it is expected that the analysis is relevant and detailed but it may lack some balance For example it includes only two detailed arguments for and one detailed argument against For 6 candidates must give a balanced examination of two possible arguments for and two possible arguments against the Irish government s decision to own 25 of the shares of Aer Lingus Marks should be allocated according to the markbands on page 3

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27 e N15 3 BUSMT HP2 ENG TZ0 XX M With reference to one internal stakeholder and one external stakeholder discuss the statement that larger is not always better from the perspective of the airline industry Candidates should look at the issue from two perspectives Internal such as from the employees managers or any relevant internal stakeholders point of view They should also look at the issues from an external stakeholders point of view such as passengers customers see below From the customers passengers point of view On the positive side as indicated in the stimulus a larger company like American can experience different economies of scale that can benefit the passengers financial economies of scale a larger airline could raise more finance cheaply to buy new and more comfortable aircraft s technical economies of scale will enable a larger airline to become more efficient by reducing operating costs per flight hence the price of a ticket can be reduced Analysts suggest that a merger in order to grow will enable the new airline to rationalize and create a possible small monopoly domination on some routes as well as create some economies of scales such as operation and purchasing The new airline is likely to be more cost efficient which is a significant argument especially in the short run given the amount of current losses Consequently customers may experience some price reduction as well as a more comfortable and possibly safer aircraft However given the large size and the larger market share combined and the suggested small monopoly domination it is unlikely that the prices will be reduced especially if the bargaining power of the airline is likely to increase Customers may end up with less choice a poorer service and higher prices imposed by a large airline that monopolizes the market The stimulus makes a reference to such a possibility Other possible internal stakeholders Larger airlines such as the newly created American is likely to be more cost efficient which is a significant benefit for the operation manager employees as well as the finance manager Efficiency due to size with subsequent lower costs and increased profit can significantly increase the motivation of managers and employees Moreover a rewards system might be based on such performance Managers objectives for increased power self satisfaction of managing a large number of employees may also increase 9

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28 N15 3 BUSMT HP2 ENG TZ0 XX M On the other hand one may argue that working for a large airline like the creation of American the US biggest airline will reduce employees motivation given some possible lack of contact with managers and from feeling like a small and insignificant part of a very large group of employees Customer service which is an extremely significant issue in a service industry people process might be negatively affected Communication barriers may be erected in a large organization which may affect each and every employee negatively Internal diseconomies of scale may be created due to the large size which can negatively affect all employees and managers morale and competencies External stakeholders such as competitors and or regulatory bodies Competitors Being a large airline might be seen by the organization strategists as a necessary action to an increase in global competitiveness of other airline groups like AIG KLM Air France etc and many others yet to be faced in the growing global market place However being large might not be sufficient appropriate to create customer values and global competitiveness which is currently the main problem of the large airlines Cost efficiency will not solve these deficiencies hence a larger airline is unlikely to be successful especially if competitors follow suit It will become increasingly difficult to create a USP apart from perhaps location or destinations There is evidence from the stimulus that there are a number of mergers takeovers Regulatory bodies Also larger airlines are more likely to catch the attention of the American MMC or any national regulatory body A reference to such a possibility is also mentioned in the stimulus These bodies are likely to put some restrictions on the operation of the newly created large airline or any other established large airline Restrictions may be put on the top management team and decision making in terms of routes landing slots pricing etc Management freedom may be reduced Moreover finance managers may spend a large sum of money on legal battles procedures Accept any other relevant and applicable argument for or against the notion of being large is not always better from the perspective of any relevant internal or external stakeholder

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29 N15 3 BUSMT HP2 ENG TZ0 XX M In conclusion one should not undermine the benefits of being a large airline and the possibilities of reducing costs increasing prices and hence increasing profit and cash flow The profit can potentially be invested in improving customer service in the medium to longer term done from a stronger financial position However management at large airlines should be aware of possible inefficiencies in the extra 3Ps as well as other diseconomies of scale and the inevitable interest which being large will develop from competitors Nevertheless it appears that merger and acquisitions are the prevailing trend in the airline industry and many airlines use these strategy even as a defensive measure The evidence in the stimulus clearly demonstrate this point whereas the notion that larger may not always be better perhaps more theoretical suggested by analysts and hence of lesser weight However one cannot accept the notion that larger is not always better Candidates are expected to use the airline industry as an example and to comment on the merit or otherwise of their arguments Other stakeholders could be considered Accept any substantiated discussion N B It is not expected that the candidate incorporates all of the above points issues A balanced response is one that covers at least two issues for and at least two issues against In this case as discussion in relation to two stakeholders is expected one argument for and one argument against for each stakeholder is sufficient Candidates can provide a balance response comparing and contrasting the effects on different stakeholders eg positive effects on customers but negative effects on employees but at least two arguments for and two arguments against for balance If there is no classification of the stakeholders in term of internal external award up to a maximum of 7 For one relevant issue that is one sided award up to 3 If the response is a one sided relevant approach with no discussion award a maximum of 4 Award a maximum of 5 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 or the there is only reference to either one internal stakeholder balanced analysis or one external stakeholders balanced analysis with a judgment Candidates cannot reach the 5 7 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer Marks should be allocated according to the markbands on page 4

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30 5 a N15 3 BUSMT HP2 ENG TZ0 XX M Describe one reason for the importance of innovation for SP 2 The stimulus indicates that the combination of shorter product life cycles for online games due to a rapidly changing technological and competitive environment implies that in order to remain viable and retain its market leader status SP will need to keep innovating It also takes at least three years for a computer game to be introduced to the market so this innovation should be ongoing N B Direct application to SP is not required but some understanding of the nature of the industry is Award 1 for identification of the importance of innovation with an additional 1 for a description Award a maximum of 2 b Identify the first two stages of the product life cycle The first two stages of the product life cycle PLC are traditionally introduction growth N B Accept development then introduction as some textbooks refer to the former as the starting point of the PLC Accept launch Award 1 per stage identified up to a maximum of 2 2

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31 c N15 3 BUSMT HP2 ENG TZ0 XX M Explain one benefit and one cost of family branding for SP Family or umbrella branding occurs when a business uses the same brand name for a range of products SP as it is the market leader will brand new games with the same established family name and perhaps with a SP logo to reassure customers that they belong and are associated to SP Family branding allows for SP to save funds with brand development of new products and allow for some marketing economies of scale unit costs of advertising as SP s advertising expenditure such as above the line could be spread over a number of products games The use of family branding for the new products in the same industry will create immediate recognition Brand loyalty can be transferred from Sigma Starfighter 1 to the new products of Sigma Starfighter 2 as well as to the new app However the major cost of family branding is that with a brand stretched over a number of products in this case the new app as well as Sigma Starfighter 2 the possibility arises that if one product game that SP produces for some reasons fails to live up to expectations or has an even shorter product life cycle than rival product game s the whole SP family brand could be tarnished affecting current and future brand development in the minds of customers The new mobile phone app is something that SP has not tried before hence the increased level of risk of brand erosion extended negative brand image It is expected that a specific reference is made either to the app and or Sigma Starfighter 1 and or 2 not just to the games Mark as 3 3 Award 1 for identifying describing each appropriate benefit cost of family branding 1 for an appropriate further explanation and 1 for application to SP Award a maximum of 3 If the answer makes reference only to branding and not family branding but is in context to SP then award a maximum of 4 2 2 6

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32 d N15 3 BUSMT HP2 ENG TZ0 XX M Analyse the appropriateness of penetration pricing for SP when they launch Sigma Starfighter 2 Penetration pricing may be appropriate for SP because Given the competitive nature of the online market penetration pricing may allow SP to capture and increase its market share SP may not have a choice but to use a competition based pricing strategy regardless of the nature of the innovative product Given the short term cash flow difficulties SP s current cash flow is weak therefore it may be possible that SP decided to use price penetration to attract customers and generate immediate cash even if it does not cover the R D But Innovative products normally command price skimming in order to cover the high costs of R D of Sigma Starfighter 2 especially when the product life cycle tends to be short due to improved technology as well as a strong chance that the competition will come up with a new and possibly more exciting innovating game s It does say in the stimulus that the technological and competitive environment is changing rapidly hence SP should ensure that profit is generated at the early stage of its innovative product SP s decision will anger some of their investors from putting its future innovation and longer term projects in jeopardy as there are no guarantees that penetration pricing will lead to an increase in profits This is an important source of finance for SP Penetration pricing may lead to a race to the bottom if competitors follow suit and this may again impact on the future cash flows profits for SP further threatening their opportunities for innovation There may be quality concerns if the market perceives that the price of the new game is too low Accept any other relevant analysis N B It is not expected that candidates incorporate all of the above points issues 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 For one relevant argument for and one relevant argument against award up to 4 For 5 it is expected that the analysis is relevant and detailed but it may lack some balance For example it includes only two detailed arguments for and one detailed argument against For 6 candidates must give a balanced analysis of two possible arguments for and two possible arguments against the use of penetration pricing for SP when they launch Sigma Starfighter 2 Marks should be allocated according to the markbands on page 3 6

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33 e N15 3 BUSMT HP2 ENG TZ0 XX M Discuss two problems of financing research and development R D for a business such as SP One has to assume that R D in such an innovative industry is frequent continual and expansive Hence a significant and frequent amount of finance is needed for SP to develop its products One also has to bear in mind that due to some cash flow problems SP might not have enough cash to inject which also indicates the need to raise large funds The stimulus clearly demonstrates that SP is operating within a competitive marketplace There will be other businesses in the same industry who will also be looking for investment finance hence competition However due to its market leader position brand image etc some external sources of finance like business angels venture capitalist etc might be willing to invest The other problem is that the time taken three years to bring creative innovative ideas to the market may mean that investors become impatient There is a considerable amount of risk which will need to be experienced by investors There is also the issue that within a rapidly changing technological market the three year time lag may be too long A game may be out of date before it is released Investors may have to accept lower returns Also SP is looking to give away an app for free Some potential investors may be concerned with this idea Payback periods if at all will be much longer SP will need to spend time and resources convincing potential investors that short term losses will be offset by longer term profits when the app begins to add value Risk averse investors who are not aware of freemium type services may be further reluctant to invest However there might be risk taking investors again like venture capitalists who might be attracted by the new app and the general direction taken by SP despite some short term difficulties These investors might be willing to accept long term returns on innovative products of the current market leader Moreover as SP operates online the search for a global investor is possible On a more general issue SP appears to be unincorporated and this severely limits access to most forms of finance for R D and many game firms can operate with a very small asset base and hence they will have very little security for loans for R D Despite a weak cash flow some potential investors may see this new app as a way for SP to confirm themselves as the market leader Sigma Starfighter 2 has the potential to be very popular financially and this could have significant benefits for Sigma Starfighter 1 and other products under the family brand which is very strong Profits could grow reducing the reliance on external sources of finance allowing greater creativity and innovation in the future 9

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34 N15 3 BUSMT HP2 ENG TZ0 XX M Possible judgment Perhaps one may judge the current problem of raising finance as a short term problem only hence not a very significant one Given the successful past and the possible future success of the new app and Sigma Starfighter 2 in the medium term if the two products are successful more cash and profit will be generated to finance future R D Moreover many other potential sources of finance can be available as well possibly through the use of price skimming rather than penetration in the short run Accept any other relevant discussion N B Accept any relevant argument for and against the problems of financing R D for SP and other similar businesses in this industry N B It is not expected that the candidate evaluates different sources of finance available for SP A balance response covers at least two arguments for and at least two arguments against For one relevant issue that is one sided award up to 3 If the response is a one sided relevant approach with no discussion award a maximum of 4 Award a maximum of 5 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 Or if the candidate only discusses one problem in financing R D for businesses such as SP The one problem for example may only refer to attitudes to risk Candidates cannot reach the 5 7 markband if they give judgment conclusions that are not based on analysis explanation already given in their answer Marks should be allocated according to the markbands on page 4

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2 N15 3 BUSMT SP2 ENG TZ0 XX Section A Answer one question from this section 1 Calorie Count CC Evana Dox has recently set up her own business called Calorie Count CC She has identified a precise market segment local middle aged people struggling to have a healthy lifestyle because of long working hours Customers will order meals in the morning and in the evening Evana will deliver the meals Evana is converting the ground floor of her house into a professional kitchen complying with all hygiene standards and food safety regulations She will employ her niece Athena a graduate from a catering college 60 of the initial investment and start up costs will come from Evana s personal savings the other 40 will be financed by external sources Evana has carried out secondary market research and found that the net profit margin in catering businesses of the same size is 35 However for her new business Evana knows that her net profit margin will be much lower For her first year of operations she aims for a net profit margin of 15 In the first year she hopes to sell an average of 50 meals per day 5 days per week She estimates that each meal would be sold at an average price of 17 This price Evana believes will be competitive and will generate an adequate contribution per meal for her business to be successful CC uses a cost based pricing strategy with the following estimated costs variable cost per meal 70 of selling price fixed cost per annum 42 000 a Identify two variable costs for CC 2 b Define the term contribution 2 c Calculate for CC i the break even level of output show all your working 2 ii the margin of safety if it sells 50 meals per day 260 days per year show all your working 2 iii the profit or loss if it sells 50 meals per day 260 days per year show all your working 2 d Construct a fully labelled break even chart to scale for CC 5 e Analyse the appropriateness of a cost based pricing strategy for CC 5

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N15 3 BUSMT SP2 ENG TZ0 XX 3 2 Bip Bip BB Nicol s and Loura want to start up a vehicle rental business in Punta del Este a seaside resort in the Southern Hemisphere The business will operate as a partnership and will be called Bip Bip BB Tourism is very high during the summer months December to February in the Southern Hemisphere the beach and water sports attract many tourists BB will rent out convertible cars electric cars and minivans BB will purchase these vehicles through a leasing scheme Because most rental income will occur in a few months in a year we must forecast our cash position during the slow months says Loura She has forecasted the following figures for the first six months of operation beginning in December 2015 All revenues received and costs paid will be in cash All cash sales are paid at the time of the vehicle rental Monthly revenue from rentals December 2015 to February 2016 Monthly revenue from rentals March to May 2016 Monthly overheads starting in December 2015 Leasing fee for all vehicles payable by BB every other month starting in December 2015 Monthly variable costs December 2015 to February 2016 Monthly variable costs March to May 2016 Opening balance in December 2015 11 000 1000 2000 5000 1500 300 1000 Due to the increasing importance of e commerce Nicol s is considering whether BB should offer an online booking service through their website Some of BB s competitors have online booking but many have chosen not to offer this service a Identify two possible sources of finance other than leasing that BB might use to obtain the vehicles 2 b Identify two features of a partnership 2 c i 6 Prepare a monthly cash flow forecast for BB for the first six months of operation ii Comment on BB s forecasted cash flow position 3 iii Calculate BB s forecasted net profit for the first six months of operation show all your working 2 d Analyse the advantages and disadvantages for BB of using an online booking service 5 Turn over

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4 N15 3 BUSMT SP2 ENG TZ0 XX Section B Answer two questions from this section 3 Mercy Ships MS Mercy Ships MS is a non profit organization that operates the largest non governmental hospital ship in the world the Africa Mercy With the Africa Mercy Mercy Ships provides free healthcare and other medical services Each year Mercy Ships undertakes thousands of surgical and dental procedures and community health projects Before the Africa Mercy arrives at a port Mercy Ships uses brochures aimed at local people to promote its services Mercy Ships also treats patients at dental clinics away from the port itself Everyone on the Africa Mercy is a volunteer To keep the ship in operation it requires a staff of 400 volunteers including doctors and nurses as well as chefs engineers hair stylists and many other people from different professions People volunteer for varying lengths of time and must apply for available positions Mercy Ships volunteers agree to follow a strict code of conduct and also pay a fee to participate Volunteers include young people before they begin their professional life middle aged people who want a career break and older people who want to remain active and make a difference All volunteers believe in Mercy Ships vision statement to become the face of love in action bringing hope and healing to the poor Source www mercyships org Identify two ways non profit organizations differ from profit based organizations a b Explain two elements of MS s marketing mix other than product price place and promotion 6 c Apply one theory of motivation to MS s volunteers 5 d 7 To what extent does MS face challenges in its workforce planning 2

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5 N15 3 BUSMT SP2 ENG TZ0 XX 4 OneWorld OneWorld is an artistic and cultural centre in England United Kingdom UK Founded in 1979 it organizes events meetings and exhibitions in order to achieve its vision statement In our multicultural society today all religious and ethnic communities will know and respect one another Last month for example it organized celebrations for Diwali the Indian festival of lights a series of lectures entitled Unity and Diversity and an exhibition of photographs called Traditional Christmas in Poland The exhibition proved very popular especially after it featured in a television news documentary about Polish migrants in England OneWorld is a non profit organization with three sources of income donations from sponsors such as local businesses sale of tickets to some events exhibitions are usually free but OneWorld charges a small fee for the lectures funding from the public sector Each source contributes approximately one third to OneWorld s income However following the global economic downturn beginning in 2008 contributions have reduced In addition funding from the public sector may disappear after the next government elections one major political party has announced funding cuts to artistic and cultural centres For OneWorld this change means less income but more independence from the government The directors of OneWorld have recently appointed a marketing officer Rajesh Singh They gave him several tasks formulating marketing objectives for OneWorld preparing a promotional mix developing marketing strategies and using new forms of social media more effectively OneWorld has a vision statement but no mission statement Rajesh first wants to write a mission statement for OneWorld a Define the term promotional mix 2 b Explain two types of below the line promotion that Rajesh could use for OneWorld 4 c Formulate a mission statement for OneWorld 2 d Analyse the role of mission statements and vision statements for an organization such as OneWorld 5 e Evaluate the impact of changes in external factors on OneWorld 7 Turn over

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6 5 N15 3 BUSMT SP2 ENG TZ0 XX Le Bon Chocolat LBC Le Bon Chocolat LBC owns a small chocolate factory located in Bayonne a French city near the Spanish border LBC is a family business founded in 1946 by Michel Lalanne who operated it as a sole trader Since 1980 LBC has been a private limited company All shareholders are members of the Lalanne family LBC manufactures most of its chocolates in a flow production process Some special orders however are made through batch production for example sugar free Christmas chocolates or egg shaped Easter chocolates LBC employs a local accountant to prepare the company s financial statements The following table shows his calculations for last year Net profit margin Current ratio Acid test quick ratio Stock turnover in days LBC Industry average 16 14 1 8 1 8 0 8 1 24 18 LBC sells its chocolates directly to customers through a well known shop in the city centre The accountant however recommends that LBC add a new channel of distribution The Lalanne family is considering two options Option A sell LBC chocolates in small independent shops in the region through wholesalers Option B sell LBC chocolates online that is business to customers B2C e commerce a Identify two features of a private limited company 2 b With reference to LBC and to other examples of your choice compare flow production and batch production 6 c Interpret the financial calculations provided by LBC s accountant in the table above 5 d Recommend to the Lalanne family whether they should choose Option A or Option B 7

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3 N15 3 BUSMT SP2 ENG TZ0 XX M The markbands on pages 3 4 should be used where indicated in the markscheme Section A Q1 e Q2 d Section B Q3 c Q4 d Q5 c Level descriptors Marks 0 5 0 1 2 3 4 5 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No reference is made to the information in the stimulus material The response is mainly theoretical A description or partial analysis examination with relevant knowledge and or understanding of relevant issues concepts and theories Some use of appropriate terminology Some reference is made to the information in the stimulus material not just to the name of the organization A balanced analysis examination with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories An analysis examination that uses appropriate terminology throughout the response Explicit references are made to the information in the stimulus material

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4 N15 3 BUSMT SP2 ENG TZ0 XX M Section B Q3 d Q4 e Q5 d Level descriptors Marks 0 7 0 No knowledge or understanding of relevant issues concepts and theories No use of appropriate terminology 1 2 Little knowledge and understanding of relevant issues concepts and theories Little use of appropriate terminology No evidence of judgments and or conclusions No reference is made to the information in the stimulus material 3 4 A description with some knowledge and or understanding of relevant issues and concepts Some use of appropriate terminology No evidence of judgments and or conclusions Some reference is made to the information in the stimulus material not just to the name of the organization The response is mainly theoretical 5 6 A response with relevant knowledge and understanding of relevant issues concepts and theories A response that uses relevant and appropriate terminology Evidence of judgments and or conclusions that are little more than unsubstantiated statements that has balanced analysis and demonstrates understanding Explicit references to the information in the stimulus material are made at places in the response 7 A response with accurate specific well detailed knowledge and understanding of relevant issues concepts and theories A response that uses appropriate terminology competently throughout the response A response that includes judgments and or conclusions that is well supported and underpinned by a balanced analysis Explicit references to the information in the stimulus material are made throughout the response

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5 N15 3 BUSMT SP2 ENG TZ0 XX M Section A 1 a Identify two variable costs for CC 2 Possible variable costs for CC include food utilities supplies petrol for delivery vehicle wages electricity provided that candidates relates it to output Accept any other relevant variable cost Award 1 for each appropriate variable cost identified up to a maximum of 2 b Define the term contribution Contribution refers to the portion of unit sales revenue after per unit variable costs have been deducted This portion is then available to be applied to the fixed costs Candidates are not expected to word their definition exactly as above 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 For 2 the candidate must include the idea of per unit or in the case of CC per meal N B If a candidate gives a formula such as per unit sales price per unit variable costs but with no mention of fixed costs award 1 If the candidate gives a formula and then provides some reference or relationship of the unit contribution to fixed costs award 2 The candidate does not have to use the words fixed costs but that idea or some sense of the idea of a business s fixed costs needs to be conveyed 2

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6 c N15 3 BUSMT SP2 ENG TZ0 XX M Calculate for CC i the break even level of output show all your working Break even quantity 2 fixed costs contribution Contribution per meal selling price variable cost 17 17 x 70 5 10 42000 5 10 8236 Break even quantity Accept 8235 Because 42 000 5 10 8235 2941 candidates may think to round down Whereas one could argue that technically the business has not reached break even at 8235 it is only short by 1 50 which is not material for a business with forecasted sales of 221 000 Award 1 for working or formula and 1 for the correct answer Award up to a maximum of 2 ii the margin of safety if it sells 50 meals per day 260 days per year show all your working 2 50 x 260 13 000 13 000 8236 4764 Margin of safety is 4764 N B Allow candidate own figure rule OFR from part i calculation Award 1 for working or formula and 1 for the correct answer Award up to a maximum of 2 iii the profit or loss if it sells 50 meals per day 260 days per year show all your working 13 000 x 17 total revenue 221 000 221 000 variable cost fixed cost profit 221 000 0 70 x 221 000 42 000 profit 221 000 154 700 42 000 24 300 Profit is 24 300 Award 1 for working or formula and 1 for the correct answer Award up to a maximum of 2 2

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7 d N15 3 BUSMT SP2 ENG TZ0 XX M Construct a fully labelled break even chart to scale for CC Award marks as follows 1 for each appropriately labelled axis maximum of 2 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 If axes are not completely and properly scaled award a maximum of 3 assuming the candidate has earned at least 3 from above In its label the y axis must have both costs and revenue The x axis can be output sales quantity number of meals or any other term that gets at this concept Award 0 if a candidate produces a table and award no more than 3 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 break even point a vertical line from the x axis to the break even point provided that the line is labelled break even point 5

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8 e N15 3 BUSMT SP2 ENG TZ0 XX M Analyse the appropriateness of a cost based pricing strategy for CC All businesses are influenced by their costs when determining prices Costbased pricing as a strategy refers to setting price with costs acting as its bottom line Such businesses may have more influence of cost on their prices For example the use of exotic vegetable unseasonal food items special preparations customized meals Cost based pricing involves the addition of a profit element to the costs of production This form of pricing guarantees a profit since the fixed and the variable costs are all covered and the price is always set above the costs to allow for a net profit margin Evana through secondary market research has data that while established businesses of the same size in the same industry earned an average of 35 markup Evana was expecting a 15 markup on her costs With the pricing that Evana plans to sell meals at 17 she is likely to have a markup of 11 and therefore may wish to review her prices to obtain the desired 15 markup This pricing strategy may be appropriate as the cost of meals will vary depending on the use and the cost of ingredients For example meals using seasonal vegetables which are abundant in supply and therefore reasonably priced may have matching low prices similarly non vegetarian meals may be priced differently while Italian Mexican dishes may be priced accordingly Such a pricing strategy is also appropriate where businesses are not willing to sacrifice some of their profits for lower prices However a cost based strategy may not be appropriate as it ignores the impact of competition on consumers If competitors are selling at lower prices the market becomes competitive then the business might see its sales decreasing rapidly This is only likely if the market is not particularly competitive and this approach is adopted as an industry norm Alternatively it may apply if the firm has a particular USP in such a case pricing may have a low impact on the business The adoption of any pricing strategy including a cost based one should be backed by adequate market research to fully understand the nature income and psychographic characteristics of CC s target market Accept other relevant analysis and application of a cost based pricing strategy to CC To achieve the highest markband the answer must demonstrate analysis of the suitability of cost based pricing strategy to CC not just general benefits and drawbacks of the strategy Accept any other relevant analysis Marks should be allocated according to the markbands on page 3 5

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9 2 a N15 3 BUSMT SP2 ENG TZ0 XX M Identify two possible sources of finance other than leasing that BB might use to obtain the vehicles 2 Possible sources of finance include bank loan loan from family or friends capital provided by another partner or partners personal savings hire purchase government small business grant accept grant from government or government grant business angel do not accept venture capitalist which is not appropriate Accept any other relevant source of finance N B Short term borrowings or overdraft is not an appropriate source of finance in this situation and should not receive a mark Award 1 for each appropriate source of finance identified up to a maximum of 2 b Identify two features of a partnership Possible features include it s an association between 2 to 20 partners partners do not have limited liability it s an unincorporated business Accept any other relevant feature Award 1 for each appropriate feature identified up to a maximum of 2 2

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10 c i N15 3 BUSMT SP2 ENG TZ0 XX M Prepare a monthly cash flow forecast for BB for the first six months of operation 6 All figures in Sales revenue Total receipts Overheads Leasing fee Variable costs Total payments Net cash flow Opening balance Closing balance December 11 000 11 000 2000 5000 1500 January 11 000 11 000 2000 1500 February 11 000 11 000 2000 5000 1500 March 1000 1000 2000 May 1000 1000 2000 300 April 1000 1000 2000 5000 300 300 8500 2500 3500 7500 8500 2500 2300 1300 7300 6300 2300 1300 1000 3500 11 000 13 500 12 200 5900 3500 11 000 13 500 12 200 5900 4600 N B Allow candidate own figure rule OFR if a candidate makes an error in one row and carries it through the remainder of the forecast that is only one error This provision includes both mathematical errors and conceptual errors for example if a candidate has the leasing fee monthly rather than every other month it is one error and candidates should only lose 1 for that error Award 1 if the candidate conveys some understanding of what a cashflow forecast is but otherwise the forecast is largely inaccurate incomplete or illegible Award 2 3 if a cash flow forecast is drawn but either it is not in a generally accepted format or it is untidy and the forecast contains two or more errors which could include in addition to number placement problems and mathematical errors conceptual errors using the word profit rather than net cash flow or omissions such as not having a line like closing balance Award 4 5 if the cash flow forecast is drawn essentially correctly and neatly in a generally accepted format but there is one error for 5 or two errors for 4 Award 6 if the cash flow forecast is drawn accurately and neatly in a generally accepted format and is error free Substituting the term net profit in the cash flow forecast for net cash flow is inaccurate If the candidate has only one row for all cash outflows subtract 1 from the total mark awarded

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11 ii N15 3 BUSMT SP2 ENG TZ0 XX M Comment on BB s forecasted cash flow position Although the cash balance is positive at the end of six months the monthly net cash flows are only positive in the first 3 months If the figures for remaining low season months June through November continue BB s cash balance would be negative by the end of month 7 June and by the opening of high season next summer the cash balance would be 18 200 far greater than the cumulative positive balances for the 3 peak months The cash flow forecast shows that the current business model is not sustainable Allow candidate own figure rule OFR Award 1 for an accurate basic comment Award an additional 1 for reference to specific figures which could be actual numbers or references to a specific row in specific time periods net cash flows in December January and February is a specific reference to actual numbers even if numbers are not present in the text whereas In the seasons that they do not rent as much the cash inflows do not sustain their cash outflows is not a specific reference to specific numbers Award 1 if the candidate recognizes that the business will have a deficit or cash flow problems in the months to come N B A candidate could produce a response that earns 1 for making a basic comment and 1 for recognizing a deficit in months to come for a total of 2 even though the candidate did not have specific reference to numbers 3

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12 iii N15 3 BUSMT SP2 ENG TZ0 XX M Calculate BB s forecasted net profit for the first six months of operation show all your working Method 1 Profit sales revenue total costs Sales revenue 11 000 3 1000 3 36 000 Total costs 2000 6 1500 3 300 3 5000 3 12 000 4500 900 15 000 32 400 Forecasted net profit 36 000 32 400 3600 Method 2 allow OFR Closing balance in May opening balance in December 4600 1000 3600 Award 1 for working and 1 for the correct answer Award up to a maximum of 2 A candidate may calculate monthly profit for all six months such as All figures in Revenue Expenses Net profit December January February March April May 11 000 11 000 11 000 1000 1000 1000 8500 3500 8500 2300 7300 2300 2500 7500 2500 1300 6300 1300 This approach is acceptable even if a total for all six months is not produced Award 1 for working and 1 for the correct answer all six months correct though OFR does apply Award up to a maximum of 2 2

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13 d N15 3 BUSMT SP2 ENG TZ0 XX M Analyse the advantages and disadvantages for BB of using an online booking service If BB introduces an online booking service they will probably gain on customer base as they will be able to reach regional and international potential customers with a minimum of expense Accessibility to the service will be improved and customers will be able to book the vehicles before arriving to Punta del Este Administrative and paper work could be reduced as transactions will be done online In addition through the website BB will give information about the company and advertise their services and renting conditions which will be visualized by potential customers Marketing costs will possibly fall Online booking can be done any time and would not be restricted to BB s opening hours Websites typically ask for customer feedback if this is the case BB can have access to relevant information to understand anticipate and meet changing customer preferences However many customers still refuse to do commercial transactions online due to privacy or security reasons such as the fear of online credit card fraud In addition some believe that the Internet is very impersonal and would prefer a personal service for their transactions If BB s website and the online booking system is not user friendly potential clients may be discouraged to hire vehicles using the service Accept any other relevant analysis Marks should be allocated according to the markbands on page 3 5

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15 b N15 3 BUSMT SP2 ENG TZ0 XX M Explain two elements of MS s marketing mix other than product price place and promotion Other elements of the marketing mix might include packaging people process and physical evidence Of these the stimulus provides some evidence on People MS relies on people who are passionate about helping others they must be as they actually pay to be part of the MS organization and forgo the comforts of home to live on a ship where quarters are likely to be cramped and the rules are precise Further the volunteers are not making money as they would likely to be if they were still home The passion of its volunteers would help them work in these difficult conditions though the rewards of helping those in need are probably great Process MS process is very straight forward MS goes to its patients The ship goes to ports where their services are needed Before a ship arrives in port brochures are delivered so that potential patients are alerted If patients are unable get to the ship or other locations MS staff go to the patients in mobile medical and dental clinics The other key element of the process is the delivery of modern medical services as well as can be provided in generally underfunded and ad hoc circumstances Packaging and physical evidence Limited evidence is provided for packaging and or physical evidence As for physical evidence apart from the ship itself MS probably has its logo on the medical clothing worn by the staff and on the vehicles it uses for its mobile clinics Brochures are distributed brochures are both a form of promotion and a piece of evidence Possibly though possibly not due to the cost medical supplies come in packages with the MS logo N B If a candidate says packaging and physical evidence award 1 overall If a candidate says packaging and physical evidence and then mentions only the ship award 1 overall Mark as 3 3 Award 1 for identification of an element of the marketing mix other than product price place and promotion Thereafter award 1 to 2 for each explanation of the element identified depending upon the depth If candidates treat physical evidence and packaging as separate Ps award a maximum of 4 6

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16 c N15 3 BUSMT SP2 ENG TZ0 XX M Apply one theory of motivation to MS s volunteers Candidates may apply any of the motivation theories in the guide or any other well known relevant theory of motivation Balance in this case would refer to addressing the limits of the theory of motivation they select in the context of MS For example in certain respects to volunteer for MS is indication of selfactualization Maslow yet it is unlikely that most of the volunteers had achieved all of the other levels for example young volunteers probably have not achieved full esteem self esteem confidence or achievement which collectively make up the stage before self actualization N B To achieve more than 3 a balanced answer must refer to both positive and negative aspects of the motivation theory chosen Accept any other relevant application N B Taylor would not be a relevant theory If a candidate chose Taylor and explains that Mercy Ship contradicts Taylor s theory award 1 Marks should be allocated according to the markbands on page 3 5

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17 d N15 3 BUSMT SP2 ENG TZ0 XX M To what extent does MS face challenges in its workforce planning MS faces a number of challenges in workforce planning MS relies on volunteers What happens when no one with requisite skills hair stylists or engineers for example applies MS does not know all of the medical situations it will face What if a certain type of specialist medical doctor is needed and yet MS does not have one on that voyage MS relies on volunteers with diverse and different skill sets Hair stylists cannot step in and do the work of a nurse a medical doctor cannot do the work of a ship engineer In terms of both recruitment and operations this diversity of skills is a challenge The amount of money and time that people commit could vary The strict code of conduct may cause some people not to volunteer or to back out of their commitment before or after the cruise starts MS goes to locations very far from where presumably it draws its volunteers emergency situations requiring a volunteer to go home the sickness of a parent may mean a premature termination of their volunteer period If the volunteer were living back in their home country certain kinds of emergencies like the sickness of a parent might not require them to quit their job MS also has certain advantages which would help it in terms of workforce planning Volunteers appear to find the experience rewarding and probably tell friends at home about it and encourage them to do it This could be through professional networks one cardiologist tells after his volunteer period is over other cardiologists with whom he interacts professionally about MS or through other networks a medical doctor once her volunteer period is over tells her hair stylist at home about it People who volunteer are aware that they have to pay and will not be paid Therefore labour rates pay scales are not a problem Service in the form of a gap service year ongoing volunteerism and retirement volunteering is a growing phenomenon in modern countries Accept any other relevant challenge Marks should be allocated according to the markbands on page 4 7

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18 4 a N15 3 BUSMT SP2 ENG TZ0 XX M Define the term promotional mix Promotional mix is the combination and use of different promotional methods by a business such as advertising direct marketing personal selling public relations and sales promotion Businesses preparing a promotional mix determine promotional needs of the business the different types of promotion to be used and the budget for each type and for the mix as a whole Promotional mix differs from the marketing mix in that it refers to just promotional techniques not other aspects of the marketing mix people place and price plus other Ps except promotion 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 which would typically occur by listing the different types of promotion within the promotional mix and saying more than above the line and below the line promotion or to drawing a distinction between the promotional mix and the marketing mix Providing examples is not absolutely required for 2 though for most candidates exemplification would be the easiest way to demonstrate clear understanding In the absence of clear examples a candidate s definition must be very strong or gets at promotional mix by other means such as different promotional methods for different target markets or different methods for different products etc 2

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19 b N15 3 BUSMT SP2 ENG TZ0 XX M Explain two types of below the line promotion that Rajesh could use for OneWorld Types of below the line promotion include direct marketing such as catalogues email flyers mail online display ads and pop ups promotional letters text messages personal selling of which there are many varieties public relations buy one get one free competitions for prizes giveaways price discounts sponsorship such as charities sports events Accept any other relevant answer Some form of publicity identified for example the press attending a OneWorld exhibition for 1 For 2 a candidate must explain OneWorld s role or agency in the process OneWorld could invite local journalists to receptions on the night of the opening of a new exhibit The journalists would then be more inclined to write stories for the local press N B Do not accept word of mouth as a type of below the line promotion With no further explanation viral marketing or going viral should receive 0 as viral marketing without further explanation is merely electronic word of mouth and candidates do not receive credit for word of mouth If a candidate explains that a business seeds social media in the hopes that it goes viral that would be acceptable for 2 If a candidate states social media with no explanation award 1 If a candidate explains how a business actually uses social media or terms that are virtual equivalents as a form of below the line promotion award 2 Mark as 2 2 Candidates must choose two types of below the line promotion and they may choose either a category direct marketing for example or a subset thereof text messages for example For each of the two types award 1 for identification of a type of below the line promotion and award an additional 1 for explaining why that particular type of below the line promotion would make sense for Rajesh and OneWorld 4

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20 c N15 3 BUSMT SP2 ENG TZ0 XX M Formulate a mission statement for OneWorld Although different business writers stress different characteristics of a good mission statement all agree that mission statements must be statements meaning a sentence or sentences no fragments and the verbs should be action verbs rather than verbs that convey a state of being to be to exist to become etc In general mission statements should be clear current feasible motivating precise short strategic unique and be primarily relevant to 1 employees and 2 customers have a shorter timeframe 5 years though they may be renewed if still appropriate have meaningful and measurable criteria for corporate social responsibility indications of target market including the geographic region products or services and aspirations for growth Award 1 to candidates who produce a mission statement that 1 is a sentence or sentences with subjects and verbs and 2 is at least minimally relevant and appropriate to OneWorld Accept the following if a candidate opens with an infinitive or gerund followed by a dependent clause with a verb For example if a candidate writes To ensure that every British citizen has been made aware of at least one OneWorld event every year Though technically not a complete sentence the mission statement above basically says Our mission is to ensure that every British citizen has been made aware of at least one OneWorld event every year Award 2 to candidates who produce a mission statement that 1 is a sentence or sentences with subjects and verbs and 2 is somewhat relevant and appropriate to OneWorld and contains at least several of the characteristics listed above other than short and unique which candidates responses will very likely be If a candidate writes an appropriate mission statement that exceeds 250 words award a maximum of 1 N B Examiners should bear in mind that the question is only worth 2 and that candidates will and should allocate only a brief amount of time to formulating their response Do not award 2 only to perfect mission statements or those written to a professional standard the type that students and teachers typically read Rather the aim for examiners should be to measure whether candidates know what a mission statement is what its principal characteristics should be and whether candidates can apply that knowledge to OneWorld 2

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21 d N15 3 BUSMT SP2 ENG TZ0 XX M Analyse the role of mission statements and vision statements for an organization such as OneWorld For any organization a vision statement announces the business s highest and long term aspirations Its intended audience is all stakeholders in the business Vision statements are typically lofty aspirational motivational and distant Mission statements operationalize the vision in a shorter term 5 years or so typically The intended audience for mission statements are employees and customers As noted in the markscheme to part c on the previous page mission statements typically have concrete characteristics While central to a business s strategy mission statements also guide employees tactically and operationally by giving them a guiding statement to refer to when making decisions For customers the mission statement makes clear how this business relates to them For OneWorld its vision statement In our multicultural society today all religious and ethnic communities will know and respect one another lets all stakeholders know the highest aspiration of the organization The mission statement which the candidates will have written speaks to how the intangible aspiration will be achieved N B Refer also to the markscheme for part c on the previous page Also in the context of this question balance means 1 that candidates address both the vision statement and the mission statement and 2 speak to some degree to the limits of vision and mission statements to guide a business over the long run Accept any relevant analysis If a candidate provides a basic but correct explanation of the difference between a vision statement and a mission statement with minimal or no application a long quotation from the stimulus of OneWorld s vision statement is not necessarily meaningful application award a maximum of 2 Marks should be allocated according to the markbands on page 3 5

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22 e N15 3 BUSMT SP2 ENG TZ0 XX M Evaluate the impact of changes in external factors on OneWorld The stimulus provides information on four external factors a shift in political priorities of one party which may lead to public sector funding cuts because of a change in government priorities an economic downturn has led to fewer contributions to OneWorld s income the world is becoming more diverse because of changes in legal restrictions on labour mobility or the expansion of regional trading blocs such as the EU which has led to the emergence of diverse communities and created the need for organizations with the vision of OneWorld technological changes such as the emergence of new social media is creating new opportunities If the response is a one sided relevant approach with no evaluation award a maximum of 4 One sided means that candidates do not address the fact that despite changes in the external environment OneWorld remains viable by changing strategies The organization is not brand new It opened in 1979 and presumably many changes in the external environment have occurred and will continue to occur As long as OneWorld remains flexible and sensitive to these changes it has a chance to survive Accept any other relevant evaluation Marks should be allocated according to the markbands on page 4 7

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23 5 a N15 3 BUSMT SP2 ENG TZ0 XX M Identify two features of a private limited company Features of a private limited company include limited liability for investors that is owners of shares are not liable for the debts of the company continuity of existence in the event of the death of a shareholder even a controlling shareholder the number of shareholders is limited in number which varies from country to country typically some restrictions exist as to who can own shares thus usually limited to family and friends it has fewer disclosure requirements than public limited companies it is subject to fewer statutory requirements and restrictions than public limited companies regarding the role and compensation of directors Accept any other relevant feature N B Do not accept it is an incorporated company or it is owned by shareholders Award 1 for each correct and relevant feature of a private limited company identified up to a maximum of 2 2

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24 b N15 3 BUSMT SP2 ENG TZ0 XX M With reference to LBC and to other examples of your choice compare flow production and batch production Flow production is a continuous process of production where each individual item produced goes through one stage of production before it moves onto flows to the next stage of production Flow production is continuous Each station in the flow process repetitively performs the same operation on individual items as they pass along the usually automated production line For example to make an elegant marzipan chocolate LBC would establish a production line with different stages one would be molding of the marzipan the next stage would be dipping it in chocolate the next stage would be decorating the marzipan chocolate with different coloured chocolate stripes for example or some other decorative imprint and then wrapping the item in paper or foil Flow production is typically used with a business standard products demand for which the business can count on continuously and regularly Batch production by contrast occurs when a business makes 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 For example a baker might produce a group of identical biscuits by mixing the dough for the whole group of biscuits then cutting all the dough at one stage baking the dough at the next and finally decorating the biscuits as a final stage A whole group or batch of biscuits would move through the process together Batch production typically occurs for specialty items such as a special batch of chocolates for a special occasion like a wedding or when the demand for the product is not continuous A baker for example might bake croissants and brioche in the early morning baguettes eaten at lunch at mid morning and cakes consumed with tea or coffee in the late afternoon or evening in the middle of the afternoon While the demand for the baker s goods may be regular every morning caf s buy the baker s croissants it is not continuous Mark as 3 3 Award 1 for some understanding of flow batch production 2 for clear understanding and 3 for clear understanding applied to an example If a candidate does not make any reference to LBC award a maximum of 4 Examiners should bear in mind that each half of the response to part b is worth only 3 and therefore it is not reasonable to assume that candidates will write excessively long and detailed answers A 2 mark definition for example is typically between 30 and 60 words average of 45 If we extrapolate from this length a candidate should be able to treat fully both halves of part b with approximately 90 to 180 words average of 135 6

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25 c N15 3 BUSMT SP2 ENG TZ0 XX M Interpret the financial calculations provided by LBC s accountant in the table above The financial calculations indicate that Net profit margin LBC is more profitable than other chocolate manufacturers as LBC has a net profit margin of 16 compared to the industry average of 14 In other words for every one Euro in sales LBC makes 2 centimes high profits than the average of other companies in its industry Current ratio Even though LBC has greater profitability its current ratio of 1 8 is the same as the industry average Acid test quick ratio LBC has a slightly weaker liquidity position than the industry average Whereas its current ratios of 1 8 1 is the same as the industry average its acid test quick ratio of 0 8 1 is weaker than the industry average of 1 1 Stock turnover in days The reason for the weaker acid test quick ratio is that its stock turnover in days is six days longer than the industry average which means that LBC has more of its current assets tied up in stock than the average of other businesses in the industry The table in the stimulus includes four sets of data Award marks as follows if a candidate correctly interprets one set of data award 1 two or three sets of data award 2 four sets of data 3 and explicitly link the lower than average acid test quick ratio to the longer than average stock turnover In the context of this question balance which would allow a candidate to achieve a fourth or fifth mark is that the candidate balances the interpretation of the numerical data with non numerical data from the stimulus Areas where candidates might apply to the non numerical data include Higher than average net profit margin industry averages are often by sector and LBC works in two sectors secondary and tertiary According to the stimulus LBC manufactures chocolates and runs a chocolate shop which is in the city centre Thus when selling retail LBC probably earns more than chocolate makers selling only to wholesalers Longer than average stock turnover operating in both the secondary sector manufacturing and the tertiary sector retailing LBC must carry the stock through two stages of production to the consumer purchase chain If industry averages are largely shaped by manufacturers who sell product directly to wholesalers or retailers LBC which carries through the retail phase would have longer turnover The longer than average is why the accountant is recommending a new distribution channel Accept any other relevant interpretations Marks should be allocated according to the markbands on page 3 5

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26 d N15 3 BUSMT SP2 ENG TZ0 XX M Recommend to the Lalanne family whether they should choose Option A or Option B LBC is considering two different options for an additional distribution channel selling LBC chocolates in small independent shops in the region through wholesalers and selling LBC chocolates online e commerce Both options have advantages and disadvantages The advantage of selling chocolates in small independent shops in the region through wholesalers is that LBC would be able to sell chocolates immediately at the end of the production cycle and not have to carry that stock through the retail phase Furthermore the term region implies that the reach of LBC s chocolate would be geographically greater than it currently is and product placement in shops could increase product awareness However selling chocolates through wholesalers would mean selling at lower prices prices to wholesalers would be far lower than the retail price LBC fetches in its store Furthermore the mass distribution in shops could have a negative psychological impact on current consumers LBC chocolates may lose cach who know the product in part because of the well known shop in the centre of town Finally sales to the shops could cannibalize sales of LBC s own shop The advantage of selling LBC chocolates online is that LBC could still sell chocolates at retail or close to retail prices if the sales are B2C The degree to which this distribution channel would shorten inventory turnover is not clear An online business can sell anywhere people have the Internet and increases in sales through this channel would be less expensive than some other options other shops However to take advantage of the worldwide reach of the Internet LBC would have to advertise its products Finally though probably less expensive than opening additional retail space LBC would have to develop all the processes for taking orders packaging and shipping the chocolates which could be complex and expensive Accept any other relevant assertions that the candidate makes in their evaluation and recommendation N B It is not expected that the candidate incorporates all of the ideas above However if the response is a one sided relevant approach with no evaluation award a maximum of 4 One sided means that the candidate 1 address only one of the options or 2 address only the positive considerations of each option but not the negatives To earn a mark in the top markbands 5 6 or 7 a candidate must have a balanced response with a supported conclusion Marks should be allocated according to the markbands on page 4 7