Business 9609/31 May/June 2024: question paper and mark scheme

Mark scheme

1 Analyse two advantages to GBS of using flexible part-time employment contracts. 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 relevant Application of two relevant Limited analysis points is used to answer the points to a business context. Limited analysis that identifies question. Application of one relevant connections between causes, Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 1 Note: Only reward benefits. If more than two benefits are referred to, reward the best two. Benefits must apply to GBS. All annotation ( ) should be in the left margin. Indicative content AO1 Knowledge and understanding Definition or explanation of flexible part-time employment contracts (max K 1 mark). Employees are only contracted to work for a certain number of hours each week but less than the full-time working week. Possible advantages include (max 2 K marks): Higher productivity due to improved employee morale Lower fixed costs Low labour turnover Less absenteeism Attract wider range of potential employees Greater commitment to and engagement with the organisation. 1 AO2 Application Limited application, applies knowledge to GBS once. Developed application, + applies knowledge to GBS twice. Max one for application for the first advantage and max one for application for the second advantage. Small number of employees (13). Link to GBS being able to react quickly to seasonal fluctuations. Link to low inventory of extracted materials. 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. Employees feel they are in control of their work arrangements with regard to time so productivity is higher therefore unit costs are lower which enables GBS to be price competitive in the market . Employees feel trusted and have some choice, leading to lower labour turnover and therefore a reduction in recruitment costs . Employees have a degree of choice over when they work resulting in less absenteeism and greater output to meet customer demands . Choice of work times attracts a wider range of potential employees improving the quality of workers and therefore increasing output . Part-time employees can be employed at busy periods to ensure that demand is met . Accept all valid responses.

Mark scheme

2 Analyse two disadvantages to GBS of its proposed communication process innovation. 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 relevant Application of two relevant Limited analysis points is used to answer the points to a business context. Limited analysis that identifies question. Application of one relevant connections between causes, Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2 Note: Only reward problems / disadvantages. If more than two problems are referred to, reward the best two. L2AN (3 marks) is possible for just one point made. All annotation ( ) should be in the left margin. Indicative content AO1 Knowledge and understanding Definition or explanation of process innovation (max K 1 mark). Application or introduction of a new technology or methods/systems that increase efficiency. Examples include new IT systems, use of blockchain, automated payments or inventory, robotics. Possibility that the changes form part of an ERP system. Possible disadvantages include (max K 2 marks): Cost of the proposals and need for finance. Possible employee resistance to change. Cost of training employees. Technology may fail. 2 AO2 Application Limited application, applies knowledge to GBS once. Developed application, + applies knowledge to GBS twice. Max one for application for the first problem and max one for application for the second problem. Number of employees (13) – will need training. Low inventory. Proposal includes coordinated IT system linking customer orders and distribution. Tracking of orders of sand & gravel. Gordy is thinking of expanding the business. Finance needed for new grinding machine. 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 new IT system could be expensive to implement resulting in cash flow problems . Employees may feel they have less control as a result of the process innovation. This may result in conflict and disturb current effective working relationships and employees may leave increasing recruitment costs . Employees will need training which will increase costs and reduce profit in the short term . Opportunity cost of investment which could delay the purchase of the new grinding machine therefore reducing the ability of GBS to meet increasing demand . The app could crash causing customers to be unable to place orders and going elsewhere to purchase building materials resulting in a loss of sales and therefore profit. Accept all valid responses.

Mark scheme

3(a) Refer to lines 24–25. Calculate the accounting rate of return (ARR) for the new grinding machine. 2 Indicative content Note Answer Mark Correct answer with or without 9000 / 55 000 × 100 = 16.4% OR 16.36% 2 working Accept 16.4 OR 16.36 One or more of the following: 45 000 / 5 = 9000 [Accept 9] 1 Average profit 110 000 / 2 = 55 000 [Accept 55] Average investment ARR =Average profit / Average investment × ARR equation 100 Zero marks No creditable response 0 3(b) Refer to Table 1.1. Calculate the net present value (NPV) of the new grinding machine. 2 Indicative content Note Answer Mark Correct answer with or without $22 000 OR 22 000 2 working Accept: $22 OR 22 One or more of the following: 19 + 27.3 + 25.8 + 28.7 +31.2 = 132 (000) 1 Discounted cashflows Yrs Sum of discounted future cash flows minus the 1–5 initial cost NPV equation Zero marks No creditable response 0 3(c) Evaluate whether GBS should purchase the new grinding machine. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation 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 knowledge Developed application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to that identifies A developed and/or factor(s) is used the business context. connections between judgement/conclusion is to answer the question. causes, impacts and/or made. consequences. Developed evaluative comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to that identifies A judgement/conclusion is and/or factor(s) is used the business context. connections between made with limited supporting to answer the question. causes, impacts and/or comment/evidence. consequences. An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. 3(c) All annotation ( ) should be in the left margin. Indicative content AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of one factor in the decision. Developed knowledge + will be demonstrated through knowledge of two or more factors in the decision. Understanding of investment appraisal methods – NPV, ARR, payback period. Understanding of possible qualitative factors in investment decision – business attitudes, risk, impact on stakeholders, external factors, consistency with business objectives/strategy availability of finance. AO2 Application Limited application, applies knowledge to GBS once. Developed application, + applies knowledge to GBS twice. Requirement for skilled operator. Loan finance is available. Use of data in Table 1.1 from manufacturer and Mo’s experience. Impact on unit costs. Use of answers to Q3(a) and 3(b) (OFR applies). NPV is positive $22 000. ARR is 16.4%. Payback and is in 4th year, 3 years and 10.3 months or 3.86 years. Discounted payback is 4 years 3.5 months or 4.29 years. 3(c) 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. Payback is within the 4th year so the investment is forecast to be profitable and therefore potentially worth investing in . NPV is positive and should therefore be considered as a worthwhile investment . GBS may need to finance the investment through borrowing which will increase the gearing of GBS and this increases risk for shareholders . The investment would enable GBS to meet the increasing demand for its products and therefore potentially increase profit . The grinding machine would decrease unit costs and therefore GBS could set lower prices which should result in an increase in demand . NPV (positive) and ARR is higher than 5% cost of finance indicating GBS should go ahead . 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. Data and investment appraisal methods strongly support the purchase but are the figures accurate and reliable? Is a 5-year life realistic? Can data over a 5-year future period be relied on? Qualitative factors may be as or more important than calculations. May not be reliable or accurate – can the manufacturer’s data be relied on? They are trying to make a sale so data may be optimistic plus Mo has not done any market research or research into cost savings (relied on experience). Are there any other possible investments or changes that will meet GBS’s needs? Little evidence of other possibilities other than the bullet points in last section – might finance be better spent on one of these? Can GBS afford another course of action as well as the purchase if it goes ahead? These points support the conclusion that more detailed research into sales and cost savings including checking the existing data is needed before making a decision. Is there a time scale for making the decision? Are there other possible ways for growth to occur? Need to investigate before deciding. In view of other possible options/actions in the case more research would be justified before deciding. Accept all valid responses.

Mark scheme

4(a) Calculate the price elasticity of demand (PED) for GBS’s gravel product when the price decreased from $90 to $81 4 per tonne. Note Answer Mark Correct answer with or without –2.5 4 working Negative sign not included 2.5 3 All three of following stated: Equation for PED PED = % Change in Qd / % Change in P Percentage change in 25% demand –10% Percentage change in price Two of the following 2 Equation for PED PED = % Change in Qd / % Change in P Percentage change in 25% demand –10% Percentage change in price One of the following: 1 Equation for PED PED = % Change in Qd / % Change in P Percentage change in 600 / 2400 × 100 = 25% demand –9 / 90 X 100 = –10% Percentage change in price Zero marks No creditable response 0 4(b) Evaluate the impact of elasticity measures when GBS makes marketing decisions. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation 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 knowledge Developed application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to the that identifies A developed and/or factor(s) is used business context. connections between judgement/conclusion to answer the question. causes, impacts and/or is made. consequences. Developed evaluative comments which balance some key arguments. 4(b) Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies A and/or factor(s) is used business context. connections between judgement/conclusion to answer the question. causes, impacts and/or is made with limited consequences. supporting comment/evidence. An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of elasticity measure or knowledge of the impact on GBS marketing decisions. Developed knowledge + will be demonstrated through knowledge of elasticity measure and knowledge of the impact on GBS marketing decisions. Explanation of elasticities – price, income, promotional. PED – responsiveness of Qd to a change in price. YED – responsiveness of Qd to a change in income. PrEd – responsiveness of Qd to a change in promotional spending. Understanding of marketing decisions linked to elasticity: Effectiveness of change in price to impact demand and revenue. Effectiveness of additional promotional spending to increase demand and profit. Changing the product to reduce how responsive demand is to a change in price Changing place to reduce PED. 4(b) AO2 Application Limited application, applies knowledge to GBS once. Developed application, + applies knowledge to GBS twice. GBS extracts and distributes sand and gravel – product decision. Decrease in price of 10% resulted in an increase in demand of 25%. GBS considering cuts in price. Estimated impact of a 25% increase in promotional expenditure is an increase in demand of 27.5%. Source of information is building trade journal. GDP in country Q increasing by 8%. Asking for government help for construction industry. PED for GBS gravel product is -2.5 (price elastic). Elasticity of demand for all industry gravel products: YED is 1.8 (income elastic), PrEd is 1.1 (promotion elastic). 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. Trade journal may be out of date so elasticity data may not be accurate . As demand for gravel products is price elastic this gives support for reducing price as this will lead to a more than proportionate change in demand and therefore increase revenue . The promotional elasticity of demand supports increasing spending on promotion and this will contribute to meeting GBS’s growth objectives . With rising GDP and a positive income elasticity of demand for gravel products demand should continue to rise therefore GBS does not need to reduce price or increase promotion to achieve its growth objectives . Luxury homes are likely to have a high income elasticity of demand and therefore GBS can benefit from producing more high value products as rising GDP will result in an increase in the demand for luxury homes . The reaction of competitors to any cut in price made by GBS will impact the accuracy of the estimate of PED . 4(b) 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. Table 1.2 only refers to gravel products, Gordy’s PED is for only one product. This means the data can only form part of an input to a marketing strategy. Proposals: PED indicate that a price fall will significantly increase demand so this should form part of any marketing strategy for gravel products in line with objective of growth. Effect on profits depends on costs of producing more. Income elasticity indicates GBS should prepare for an increase in demand independent of any price or promotional changes. The above is subject to GBS’s products facing the same market conditions as all industry gravels. Marketing strategy: sand products have no market information, though likely to be influenced by income in a similar way to gravel products as construction industry demand grows. A marketing strategy is much wider than just considering elasticities and GBS should use other tools and indicators when deciding on an overall strategy. Accept all valid responses.

Mark scheme

5 Evaluate the extent to which corporate social responsibility (CSR) should influence GBS’s decision to expand into 12 new land. Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation 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 knowledge Developed application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to the that identifies A developed and/or factor(s) is used business context. connections between judgement/conclusion to answer the question. causes, impacts and/or is made. consequences. Developed evaluative comments which balance some key arguments. 5 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies A judgement/conclusion and/or factor(s) is used business context. connections between is made with limited to answer the question. causes, impacts and/or supporting consequences. comment/evidence. An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of CSR or knowledge of how CSR could impact GBS’s decision to expand into new land. Developed knowledge + will be demonstrated through knowledge of CSR and knowledge of how CSR could impact GBS’s decision to expand into new land. Knowledge/explanation of CSR, including social or environmental audits. Business should take into account impact of decision on society and the environment. Stakeholder view vs shareholder view. Role of pressure groups. Cost of implementing CSR policies. Benefits to GBS of CSR approach: Image Retention of employees Increased sales Adds value Possible objectives of GBS Use of financial investment appraisal methods in making the decision. 5 AO2 Application Limited application, applies knowledge to GBS once. Developed application, + applies knowledge to GBS twice. Paying an incentive to local government official is unethical. Economy requires increased supply of building materials. Need for permission from local government. Gordy has objective of expansion. Using renewable energy to extract materials. Job creation from expansion. Protests from villagers about pollution and noise. Mo is concerned about the cost of CSR to GBS. 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. Failing to take account of CSR when making decisions could result in negative publicity and a loss of reputation this could result in losing contracts to supply building materials resulting in a loss of revenue and profit . Implementing socially responsible actions such as using renewable energy could increase costs and therefore reduce the profitability of the expansion . Businesses are part of society and therefore have a moral responsibility to consider the impact of their decisions on society . Making profit is the primary goal of private sector business and therefore it is acceptable to make any decision as long as it is within the law to increase profit on behalf of the owners . Due to the housing shortage society will benefit significantly by GBS producing more building materials therefore GBS does not need to take account of other CSR issues . 5 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. Weighing up the financial vs non-financial considerations. If expansion is a primary objective this may be more important than profit as long as costs are covered. How committed are Gordy and Mo to CSR or to maximising profit? At the moment we are not sure. Does practising CSR actually lead to an increase in costs? Short term costs vs long term savings. How important is CSR to GBS’s customers? Construction businesses are more likely to be interested in minimising their costs rather than purchasing supplies from a business practicing good social responsibility. Conclusion as to extent of influence of CSR. Accept all valid responses.