Business 9609/32 May/June 2020: question paper and mark scheme

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1 Analyse the likely impact on HBG’s costs and revenues of increasing its 10 focus on corporate social responsibility (CSR). Knowledge Application Analysis Level 3 marks 2 marks 5 marks 3 marks 2 marks 4–5 marks Knowledge of CSR Points made are Good use of theory 2 and impact on costs applied to HBG to explain impact on and revenues costs and/or revenue 1–2 marks 1 mark 1–3 marks Knowledge of CSR Some application to Some use of theory 1 and impact on cost HBG to explain impact on or revenue costs and/or revenues 0 No creditable content Knowledge Definition of CSR: this concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment Application • Reference to disabled access – for families with babies / young children too • Reference to minimum wage • Reference to renewable energy • Increasing social awareness among the public • New conservation projects linked to environmental issues • Using independent social auditors Analysis: Impact of making changes on costs and revenues of HBG. • Providing better disabled / young family access at all properties could be expensive due to the historic nature of the buildings. However, this could increase visitor numbers and membership • Paying higher wages in advance of legal requirement would increase labour costs and reduce profitability. However, this could help reduce the labour turnover and motivate employees to work harder • Investing in renewable energy sources could be expensive but in long term save HBG money by reducing fixed costs • Paying for independent social auditors is expensive but provides publicity which can be used to attract more visitors and revenue 1 shown to HBG argument or OR use of theory a weakly supported to support conclusion/recommendation with some points made focus on HBG

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2(a) Refer to Table 2. Calculate the: 2(a)(i) contribution of the café 3 Contribution = revenue – direct costs (1) Direct costs = 50 000 + 120 000 = 170 000 (1) = 300 000 – 170 000 = $130 000 (3) 2(a)(ii) profit made by the gift shop. 3 Profit = revenue – total cost (1) TC = 80 000 + 40 000 + 30 000 + 10 000 = $160 000 (1) Profit = 200 000 – 160 000 = $40 000 (3) 2(b) Refer to your answers for 2(a) and any other information. Recommend 12 whether HBG should close Oldbury Castle Café. Justify your recommendation. Knowledge Application Analysis Evaluation Level 2 marks 2 marks 4 marks 4 marks 2 marks 2 marks 3–4 marks 3–4 marks Two or more Application of Good use of Good 2 relevant points two or more theory to judgement made points to HBG answer shown question 1 mark 1 mark 1–2 marks 1–2 marks One relevant Some Some use of Some 1 point made application to theory to judgment HBG answer shown question 0 No creditable content Note to Examiners: If only refer to Table 2 or similar information limit to L1 A and E. Knowledge • Understanding of fixed costs – costs that do not change with output • Understanding of contribution concept - represents an increase in HBG’s overall profit • Understanding of full costing Application • Calculation of contribution: 300 000 – 140 000 = $160 000 • Full costing gives a loss of $10 000 • Reference to specific fixed cost at Oldbury Castle / HBG e.g. national marketing • Reference to allocation of fixed costs between the café and the gift shop. Reasons for closure • Making a loss on full cost basis • Selling gifts is more profitable • Possible saving in wages as café may be more labour intensive – need for waiters and chefs Reasons against closure • Only operating since 2019 as a profit centre. Is that sufficient time to make judgement? • A positive contribution is being made to paying fixed costs. These costs will continue to be incurred even if the café is closed • Impact on other employee morale if employees made redundant • Damage to brand if closures announced • Average spend per visitor of $2.86 • Change to menu to increase sales • Reference to customer survey 2(b) Analysis • Loss of positive contribution may mean that in the short term HBG’s overall profits will be reduced as fixed costs continue to be paid • Impact on visitor numbers to Oldbury if café is closed. Could lead to the property being less appealing and therefore a reduction in numbers and revenue • If the café were more responsive to customer feedback this could lead to an increase in sales at relatively low cost e.g. change to menu or reducing prices Evaluation • Are sales likely to pick up in the future? • Price elasticity of demand significant if prices cut • Would sales at gift shop be able to compensate for the loss of café revenue? • Supported identification of most important factor in the decision • Overall argument for or against closure 2 use of theory HBG to explain OR points made to effective and well supported explain points conclusion/recommendation, focused on made HBG 1–2 marks 1–2 marks 1–3 marks 1–3 marks Some under- Some Limited use of Limited attempt to show judgment either standing application reasoned within the answer

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3 Discuss whether introducing a decentralised organisational structure will 16 benefit HBG. Knowledge Application Analysis Evaluation Level 2 marks 2 marks 6 marks 6 marks 2 marks 2 marks 4–6 marks 4–6 marks Two or more Application of Good use of Good 2 relevant points two or more theory to judgment points to HBG answer shown question 1 mark 1 mark 1–3 marks 1–3 marks One relevant Some Some use of Some 1 point made application to theory to judgment HBG answer shown question 0 No creditable content Knowledge • Organisational structure shows the lines of authority / chain of command in an organisation – also spans of control / levels of hierarchy / formal communication channels • Definition of decentralised organisational structure • Span of control likely to be wide • Flatter structures as bureaucracies have been thinned • May help development of junior managers • Managers may take decisions that are not in the best interests of the whole organisation Application • Redundancy cost of removing three layers of middle management • Link between structure and falling sales/membership • Delegate greater authority to managers of buildings • Encourage two-way communication with employees • Reference to 2-month consultation • Reference to actions of manager at Oldbury Castle Analysis Drawbacks of decentralisation • A more centralised structure with a fixed set of rules and procedures in all areas of the firm might lead to rapid decision making being possible as there would be less discussion 3 • Less consistent policies throughout the organisation. This could lead to conflicts and create confusion in the minds of consumers about the HBG brand • Senior managers at headquarters will be experienced decision-makers They might make better decisions regarding HBG • Increased workload on remaining employees could lead to demotivation and increase in labour turnover • Cost of training for managers to enable them to deal with increased responsibility Benefits of decentralisation • A more motivated workforce contributing to greater productivity within the firm • Decision making in response to changes in local conditions may be quicker Evaluation • Did consultation ensure that employees supported the changes? • Redundancies associated with removing layers of management conflicts with new emphasis on CSR • Implementation depends on effective communication with employees to avoid industrial relations problems.

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4(a) Refer to Table 3 and Appendix 1: 4(a)(i) Complete nodes 3 and 4 on the network analysis below (reproduced from 4 the Insert). Node 3: EST = 5 (1 mark) LFT = 5 (1 mark) Node 4: EST = 6 (1 mark) LFT = 18 (1 mark) 4(a)(ii) Identify the critical path. Write your answer below. 1 ACDEG (1 mark) 4(a)(iii) Calculate the minimum time to complete the project to open Alderly 1 Gardens. Write your answer below. 20 weeks (1 mark) 4(a)(iv) Calculate the total float of Activity J. 2 Total float = LFT – duration – EST (1 mark) Or LST – EST (1 mark) 17 – 2 – 9 = 6 weeks (2 marks) 4(b) Evaluate the usefulness of network analysis to HBG when making 12 operational decisions. Knowledge Application Analysis Evaluation Level 2 marks 2 marks 3–4 marks 3–4 marks 2 marks 2 marks 3–4 marks 3–4 marks Two or more Application of Good use of Good 2 relevant points two or more theory to judgment points to HBG answer shown question 1 mark 1 mark 1–2 marks 1–2 marks One relevant Some Some use of Some 1 point made application to theory to judgment HBG answer shown question 0 No creditable content Knowledge Definition of network analysis: this is part of project management to ensure that resources are used efficiently. Also known as critical path analysis it identifies all tasks in a project, puts them in the correct sequence and allows for the identification of the critical path - fastest route to completion. Benefits of network analysis • Planning of when resources are needed and their use can save time and money • Sets target to work towards • Construction of network diagram forces managers to plan project carefully • Identifies critical activities for management to focus on Limitations • Will need to be supported by other techniques such as Gantt charts to manage resources effectively Application • Reference to activities in Table 3 • Reference to total float / free float of individual activities • Reference to three spare weeks to complete project before the 23 week deadline 4(b) Analysis • Planning of when resources are needed and their use can save time and money thus increasing profit – Fixtures and fittings can be ordered to arrive just in time for their installation in week 18 so cash outflows can be delayed. – Targets set will help motivate staff and increase efficiency Evaluation • Network presented is relatively simplistic – more detail needed • Doesn’t guarantee that project will be completed on time • HBG has experience of planning building work so should be relatively accurate

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5 Recommend the changes that HBG should make to its marketing strategy 16 to achieve its objectives of increasing membership and visitor numbers. Justify your recommendation. Knowledge Application Analysis Evaluation Level 2 marks 2 marks 6 marks 6 marks 2 marks 2 marks 4–6 marks 4–6 marks Two or more Application of Good use of Good 2 relevant points two or more theory to judgment points to HBG answer shown question 1 mark 1 mark 1–3 marks 1–3 marks One relevant Some Some use of Some 1 point made application to theory to judgment HBG answer shown question 0 No creditable content Knowledge • Marketing strategy is a detailed plan of the company’s marketing objective, budget and marketing mix • The objective set will be the benchmark of success/failure as well as a major determinant of the marketing mix and the budget level • Reference to situational analysis / market research as part of marketing Application • How product could be changed e.g. menus at the cafes could be modernised, improved play areas for children • Demand estimated to be price-elastic. 10% reduction in price could lead to 15% increase in quantity demanded • Promotions to attract grandparents with children • Need for high quality website allowing booking – link to families and international visitors • Technologies that could be used e.g. Apps developed with information on different properties • Marketing may refer to HBG’s commitment to CSR • Change to promotion away from magazines for the older customer Analysis • Reducing price may lead to a more than proportionate increase in quantity demanded therefore increasing revenue • More visitors attracted will result in increased revenues for café / gift shop • Use of social media to increase awareness and appeal to younger target audience may be more effective than television advertising 5 Evaluation • Justification of most important element of marketing mix • Changes depend on sufficient budget being made available • Most important group to target • Danger of changes alienating older customers Questions 6 and 7 use this marking grid: Knowledge Application Analysis Evaluation Level 3 marks 3 marks 4 marks 10 marks 7–10 marks Good judgment shown throughout with 3 well supported conclusion/ recommendation, focused on HBG 3 marks 3 marks 3–4 marks 4–6 marks Good under- Good Good use of Some judgment shown in the main body standing application reasoned of the answer and an attempt to support shown to HBG argument or conclusion/recommendation, focused on

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6 Evaluate whether SWOT analysis is sufficient to make sure that HBG’s 20 future strategies are the most appropriate ones for the organisation. Knowledge • Explanation of strategic analysis (SA) and its techniques – SWOT, PEST, Boston Matrix, Porters 5 Forces, core competencies. • Effective SA may result in clearer and more relevant business objectives, better strategic decisions and less risk as HBG will be better prepared for the future • Place of strategic techniques in strategic management Application Exploration of range of factors contained in Table 1 in particular: • Linking limited disabled access to disability consideration under consideration • Rising GDP per capita • Rising international tourism • Falling cost of renewable energy Analysis • The time, money and effort needed to conduct SA and impact on HBG • How SA will improve business planning and thus reduce risk e.g. HBG will be able to work on marketing strategy to attract new members. May need to increase marketing budget to be successful • Understanding the leisure market through appropriate SWOT analysis will inform HBG’s decisions and improve effectiveness of strategy choice Evaluation Clear conclusion as to the importance of SWOT analysis and/or techniques including: • Critical comments on SWOT and other techniques • Importance of understanding where the business is now in order to generate ideas and/or support for overseas expansion • Comments that SWOT analysis on its own is not enough to fully support a decision • Weighing up importance of other stages and techniques of SA within strategic management, especially objectives and choice of techniques in relation to SA

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7 Evaluate the importance to HBG of developing a change culture in order 20 to implement Eusebio’s four strategic changes (lines 46 to 49). Knowledge • Culture means the values and beliefs of an organisation – especially senior management. Culture of change means encouraging and facilitating strategic change in an organisation • Implementation means putting into effect strategic change • These changes will affect employees – opportunities but also potential threats Change can be promoted through: • Clear mission statement and sense of direction • Employee involvement • Team working / project champions Application • Eusebio wishes to make significant changes to the operation and structure of HBG • Employees consulted about organisational change • Reference to strategies that HBG is implementing e.g. CSR Analysis • Proposed changes to culture and operations require employees to be flexible and adaptable if they are to be successful. Opposition from employees will undermine the changes • A strong culture can facilitate successful strategy implementation. Where employees share common values that can energise people to promote successful strategy implementation • Need for trust to be established so that change is not feared Evaluation • Difficulty of developing a change culture – HBG is a social enterprise and bureaucratic, culture may have been unchanged for last 50 years