Business 9609/32 February/March 2025: question paper and mark scheme

Mark scheme

1 Analyse one advantage and one disadvantage to IPA of changing employment contracts from full -time to zero 8 hours for most production employees. Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. • Application of one two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: • Only reward one advantage and one disadvantage • If more than one advantage or one disadvantage is offered reward the best one. • All annotation ( ) should be in the left margin. 1 Indicative content AO1 Knowledge and understanding Definition of relevant terms (max K 1 mark) • Contract of employment sets out the terms and conditions between the employee and employer. • Full-time contract of employment – guaranteed full-time hours of work for the employees. • Zero hours contract of employment – no guaranteed hours for the employee. Knowledge of advantages and disadvantages of zero hours contract to IPA • Advantages: – Reduced labour costs. – Greater flexibility in production. • Disadvantages: – Negative impact on motivation of employee. – Increase in labour turnover. – Increase in recruitment and training costs. AO2 Application Limited application, applies knowledge to IPA once. Developed application, + applies knowledge to IPA twice. Max one for application for the first element and max one for application for the second element. Application is making use of relevant case information not just repeating it. • Recruitment of skilled production workers has been difficult. • Training given to employees. • Seasonal demand for smartphones. • Low margins on sales. • Some employees will remain on full-time contracts (link to possible conflict between employees and productivity) • Impact on quality of refurbished phones AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. 1 Chains of reasoning highlighting likely advantages / disadvantages of zero-hour contracts: Advantages • Reduced labour costs in off -peak times will enable IPA to reduce prices for its smartphones and therefore result in an increase in sales and profit • A reduction in labour costs reduces the direct costs of IPA and therefore increases gross profit Disadvantages • Zero hours contracts may reduce employee motivation therefore reducing labour productivity and increasing costs of production resulting in a reduction in profits • Employees may resist the change to zero hours contracts resulting in an increase in labour turnover and therefore an increase in recruitment and training costs • Inconsistent quality of refurbished phones due to the everchanging workforce Accept all valid responses.

Mark scheme

2 Analyse two methods to improve IPA’s liquidity. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. • Application of one two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: • If more than two methods are referred to, reward the best two. 2 Indicative content AO1 Knowledge and understanding Definition of liquidity max K (1 mark) • Liquidity relates to the ability of a business to meet its short-term debts. • It is measured by the acid test and current ratio. Methods to improve the liquidity of IPA (max K 2 marks) • Introduce JIT inventory control. • Reduce credit given to business customers. • Reduce trade receivables turnover (days). • Delay payment when purchasing smartphones. • Overdraft • Debt factoring AO2 Application Limited application, applies knowledge to IPA once. Developed application, + applies knowledge to IPA twice. Max one for application for the first method and max one for application for the second method. Application is making use of relevant case information not just repeating it. Use of relevant data from Table 1.1 • Decrease in current ratio to 0.93:1 • Decrease in acid test ratio to 0.3:1 • Difference between CR and ATR suggests that liquidity problem is a result of inventory holding. • Increase in the trade receivables turnover (days) to 34. • Credit provided to business customers. • Immediate payment for smartphone inventory purchased by IPA. • Seasonal nature of demand 2 AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. • A reduction in credit provided to business customers will bring forward payment for smartphone sales and therefore the timing of cash inflows which will increase cash held by IPA improving liquidity • Delaying payment for purchases of smartphones will enable IPA to delay cash outflows . This will increase cash held by IPA and therefore improve liquidity • Holding less stock of smartphones will reduce cash tied up in inventory delaying cash outflows and therefore improve the acid test ratio . Accept all valid responses.

Mark scheme

3(a) Refer to lines 9–11. Calculate, for 2024, IPA’s market share. 2 Market share = Sales / Market sales X 100 (1 mark if no rewardable calculation) 0.104 / 12 X 100 (1) = 0.87% (2) (% required) To award zero marks, there must be one 3(b) Refer to lines 9–10. Calculate, for 2025, the expected percentage market growth. 2 Market growth = (Expected sales 2025 – sales 2024) / sales 2024 X 100 Change in sales = 14.2m – 12m = 2.2m (1) Market growth = 2.2m / 12m X 100 = 18.3% OR 18% (2) (% required) Note: (14.2 – 12) / 14.2 X 100 = 15.49% (1) To award zero marks, there must be one 3(c) Evaluate the Marketing Director’s proposed changes to IPA’s marketing mix. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 3(c) Indicative content: AO1 Knowledge and understanding Limited knowledge Definition of marketing strategy or understanding of impact of a recommended change. Developed knowledge + Understanding of marketing strategy and understanding of impact of recommended change(s). • Marketing mix includes the 4 Ps and is part of the marketing strategy. Understanding of impact of recommended changes: • Reducing price makes smartphones more affordable. • Increasing promotion spending should increase awareness of IPA’s product. AO2 Application Limited application, applies knowledge to IPA once. Developed application, + applies knowledge to IPA twice. Recommended change is linked to relevant case material. • Marketing objective is to increase sales volume by 60% in 18 months. • Demand is thought to be price elastic i.e. responsive to price reductions. • PrEd = 0.7. Demand is not expected to be responsive to an increase in promotional spending. • Margins are low on smartphone sales. • Prices were competitive and reduction will undercut competitors. • There are many competitors in the market – no business has more than one percent of the market. • IPA sells B2B and B2C. (likely to have different price elasticities) • Move toward out of home advertising rather than digital advertising and the problem of internet access in rural areas. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis or balance of argument. • A reduction in price will make IPA smartphones relatively cheaper than competitors therefore increasing demand and if demand is price sensitive that will increase revenue 3(c) • Rural communities have limited internet connectivity therefore advertising on digital platforms will not reach potential customers so a change to out of house advertising will increase awareness of IPA’s products resulting in an increase in demand. • An increase in non-digital promotion spending should increase awareness leading to an increase in sales . This will result in higher revenue and therefore profit may also increase. • A reduction in price will make IPA smartphones relatively cheaper than competitors therefore increasing demand . This could lead to higher profit. AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • Supported judgement as to whether change(s) will achieve the marketing objective. • Factors that impact might depend on: – Response of competitors to price change. As no competitor has more than 1% market share it is unlikely that individual competitors will be significantly impacted by price reduction, so will they react by reducing price? – Low promotional elasticity of demand does not mean that promotional spending is necessarily ineffective. Impact depends on cost of additional promotion relative to increase in sales which result. – Market is growing rapidly anyway so sales likely to increase without changing marketing. – Connectivity in rural areas to mobile networks will impact usefulness of smartphones to customers and therefore demand. – Will IPA have sufficient capacity to meet an increase in demand of 60% within 18 months? • An increase in non-digital promotion spending should increase awareness leading to an increase in sales . This will result in higher revenue and therefore profit may also increase. However, as PrED is inelastic the impact may be relatively limited. • A reduction in price will make IPA smartphones relatively cheaper than competitors therefore increasing demand and therefore higher profit. However, as profit margins are very low this may reduce total profit. Accept all valid responses.

Mark scheme

4(a) Complete nodes 5 and 6 on the network diagram below (reproduced from the Insert). 2 EST of G = 9 (1 mark) LFT of D = 8 (1 mark) To award zero marks, there must be one 4(b) Calculate the total float for Activity F. 2 Total float = LFT (of F) – Duration (of F) – EST (of F) OR Total Float = LST – EST (1 mark if no rewardable calculation) Total float = 9 – 1 – 4 (1) OR 8 – 4 (1) = 4 (weeks) (2) Incorrect units e.g. 4 days (1) To award zero marks, there must be one 4(c) Evaluate the benefit to IPA of Critical Path Analysis (CPA) as a management tool in planning operations. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 4(c) Indicative content: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of CPA. Developed knowledge + will be demonstrated through knowledge of CPA and a benefit. • Understanding of CPA – network diagram, critical path, floats, minimum duration • Benefits of CPA: knowing minimum project time, start times for activities, progress monitoring, assessing significance of delays and if necessary, corrective actions. • Limitations of CPA: analysis only as good as input data, planning costs, does not ensure effective management. AO2 Application Limited application, applies knowledge to IPA once. Developed application, + applies knowledge to IPA twice. • Operations Director produced the CPA. • 24-week minimum time. • Disruption to production during works. • Delivery of machinery is from Europe. • Expansion involves building work – where is data on timings from? • Use of data in Fig 1 and answers to 4(a) and 4(b) – Total float of activity F – Free float of activity F – Activity E and G are critical activities AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. • CPA is a quantitative technique and more exact than estimation. Planning will help save resources and ensure that disruption is minimised reducing IPA’s expansion . • CPA will enable IPA to get back to full production as soon as possible and therefore manage cash flow more effectively • Important to use CPA so that customers can be kept informed of any potential impact on orders. This will help avoid customer dissatisfaction which could result in loss of sales . 4(c) AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • Justified conclusion on importance e.g. CPA very important for enabling continuous supply. – Monitoring the most critical activities such as the machinery from Europe as this could be delayed due to external factors. • CPA only as good as data – is the Operations Director capable of completing accurate CPA for the factory development? • Other information is also important e.g. CPA needs to be interpreted • Work progress must match the CPA plan. • IPA would be wise to maintain constant check on progress before and after work starts. Accept all valid responses.

Mark scheme

5 Refer to lines 70–75. Evaluate the most likely impact on IPA of the fiscal and monetary policy changes. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed Developed evaluation knowledge of application of analysis • A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections • Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 5 Indicative content: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of fiscal/monetary policy or knowledge of how changes to fiscal/monetary policy impact IPA. Developed knowledge + will be demonstrated through knowledge of fiscal/monetary policy and knowledge of how changes to fiscal/monetary policy impact IPA. • Fiscal policy is the management of aggregate demand through changes in taxation and government spending. • Monetary policy involves changes in the money supply, interest rates and the exchange rate. Impact of generic fiscal and/or monetary policy changes on IPA • Increase or decrease in demand for products. • Impact on tax paid by IPA affecting retained profits. • Impact on costs of labour. • Impact on borrowing costs. AO2 Application Limited application, applies knowledge to IPA once. Developed application, + applies knowledge to IPA twice. Links changes to case material • Telecommunications infrastructure affects the usefulness of mobile phones to households/business. • Marketing objective of increasing sales volume by 60%. • Limited internet connectivity as a barrier to sales in rural areas. • Ambitious expansion plans of IPA. • IPA sales of mobile phones in 2024 of 104 000 units. • Increasing sales of refurbished smartphones to 14.2m in 2025. • Reduction in interest rates linked to financing costs of factory expansion. • Reduction in interest rates linked to high gearing and borrowing costs. 5 AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis or balanced argument. • A decrease in income tax will increase disposable income of households. This will increase the demand for smartphones. . Therefore, helping IPA to achieve its marketing objective. • Improved mobile signal coverage will make smartphones more useful in rural areas. Therefore, there may be an increase in demand for refurbished smartphones This may increase IPA’s profitability. • A reduction in income tax may reduce wage demands of workers. Therefore, this will limit cost increases faced by IPA. This will help increase profits. • Expansionary fiscal policy will boost aggregate demand and therefore increase demand for smartphones. • The cut in interest rates will increase the discretionary income of some consumers leading to an increase in demand for IPA’s refurbished phones • The cut in interest rates will reduce the cost of borrowing therefore decreasing interest payment on any borrowing that IPA needs for the factory extension making the project more profitable . AO4 Evaluation Limited evaluation – limited supported judgement and/or a weak attempt at evaluative comment. Developed evaluation – supported judgement and/or reasonable evaluative comment. Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • Supported judgement as to overall impact of fiscal/monetary policy changes on IPA. • Supported judgement as to which change is most significant to IPA. • Factors that impact might depend on: – In the short run infrastructure projects may have limited or no impact on IPA sales as building mobile network infrastructure will take time. – Impact of cut in income tax will depend on the income elasticity of demand for refurbished smartphones. – Impact of income tax cuts will depend on the confidence of business and households about the future growth of the economy. If households lack confidence, they will choose to save rather than spend any increase in income. Accept all valid responses.